Key insights
- PIMCO's CIO downplays systemic risk in the $3.5T private credit market, citing liquidity and rate-driven stress rather than widespread defaults. He anticipates increased trading due to liquidity challenges, creating opportunities for firms like PIMCO with strong balance sheets. This suggests potential stabilization in the sector, but also highlights ongoing liquidity concerns that could create selective buying opportunities.
(Removes Blackstone from list of funds that limited redemptions in paragraph 10)
By Yoruk Bahceli
LONDON, April 15 (Reuters) - The private credit market does not pose a systemic risk to the wider financial system, bond giant PIMCO’s group chief investment officer Daniel Ivascyn said on Wednesday, echoing Wall Street executives who have signalled the sector’s problems are manageable.
The $3.5 trillion private credit sector has been in the spotlight after risks linked to artificial intelligence, fund outflows and fears of credit stress have hammered alternative asset managers’ stocks this year.
"We do not see systemic risks within private credit, we see disappointment, we see lower returns than anticipated," Ivascyn said at a PIMCO media conference in London.
PIMCO manages more than $2 trillion.
Ivascyn said he expected more private credit trading, given liquidity challenges in the sector, noting that risk in private credit markets could be transferred in a variety of ways.
"So out of necessity, there’s going to be a lot more of this selling, and that’s going to create a great opportunity for investors with fresh balance sheets, including PIMCO," Ivascyn said.
"We’ve already participated in certain deals that have taken advantage of this dynamic, and we think that there’ll be more motivated sellers later in the year."
Ivascyn did not give any details of specific deals PIMCO has been involved in.
PIMCO has purchased all $400 million of bonds issued by a Blue Owl Capital private credit fund, Bloomberg News reported on Tuesday, citing people familiar with the matter.
Blue Owl Capital, Ares Management, Apollo Global and KKR have all limited redemptions from private credit funds.
Private credit defaults are relatively contained, with most of the stress in the sector being liquidity- and rate-driven, the head of Ares Management Corp (ARES.N), opens new tab said on Wednesday.
When asked on an analyst call whether risks in private credit were systemic, JPMorgan Chase, CEO Jamie Dimon, widely seen as one of Wall Street’s most influential voices, said, "I don’t think it’s systemic."