- Investors poured $110 billion into private credit funds last year, and managers are now struggling to find ways to put all that money to work.
- JPMorgan Alternative’s managing partner picked out three areas that still have value: short-term mega-deal financing, litigation finance, and catastrophe insurance.
- All of those areas “are moving on their own trajectory, separate from the broader credit markets,” Anton Pil said.
Investors love private credit: 2018 saw a near-record year of fundraising, second only to 2017’s peak of $129 billion.
But as more money enters the space, managers are struggling to find enough ways to put all that capital to work.
“There’s only a handful of opportunities left in private credit that I’d argue still have value today,” Anton Pil, JPMorgan Alternatives’ managing partner, said at a media event on Wednesday.
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He picked out three “idiosyncratic” investment areas: short-term mega-deal finance, litigation finance, and catastrophe insurance, which picked up after the California wildfires last year.
Litigation finance is the practice by which investors help fund plaintiffs in a lawsuit in return for a cut of payouts they may get from the proceedings. The best known example is perhaps the tech billionaire Peter Thiel’s backing of Hulk Hogan’s lawsuit against Gawker, which ended in the closure of the digital-media company — and in a black eye for the emerging industry.
“Those things are moving on their own trajectory, separate from the broader credit markets,” Pil said. “The more traditional private-credit markets, we’re rapidly shifting gears to much more special situations and distressed, so we’re preparing for the end of the cycle. It’s inevitable.”
Private-credit fundraising jumped from $77 billion in 2013 to $110 billion in 2018, according to JPMorgan.
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