Partner, Portfolio Manager
This week, we are highlighting three key themes impacting markets—the Iran war, private credit, and AI disruption—which were discussed in greater detail during our Q2 Market Outlook Webinar that went live earlier this week.
Read the topline overviews below and stream your topics of interest here. Timestamps are included for easy navigation between topics.
How Are Markets Reacting To The War In Iran?
The Iran war is the main topic we’ve been focused on lately and rightfully so. The market cheered on the initial ceasefire announced on April 8, but circumstances have been complicated since then.The recent decision by the US to establish a blockade in the Strait of Hormuz has led to multiple attacks, both by the US and Iran, on ships trying to pass through the strait. Oil prices have remained below $100, but they have inched higher as of late as these hostilities potentially signal a longer conflict.
Neale Ellis, Co-Chief Investment Officer, made specific comments about market resilience and why the timeline of the war remains important, even if markets seem intent on looking past the war.
What Is Going On With Private Credit?
Partner and Portfolio Manager Aaron Wall walked through our viewpoints on private credit, an asset class that has received significant media attention over the last few months.Private credit funds are baskets of leveraged loans, typically representing the debt side of private equity transactions. Banks previously provided most of the capital to finance these loans, but regulations stemming from the Great Financial Crisis made it difficult for them to remain in the space.
The private credit industry has risen to the occasion and filled this gap, with investor access expanding significantly over just the last few years. Semi-liquid vehicles, like non-traded business development companies (BDCs), have become widely marketed as a solution for investors looking to increase portfolio income.
The loans, which typically trade at a floating rate spread above a short-term benchmark interest rate, boast attractive yield. The loans are also primarily senior secured, meaning that they tend to be first in line if the borrower runs into trouble.
Private credit represents a unique tool for investors, and it isn’t something that should be entirely ignored.
In the webinar, Aaron discusses how we assess the asset class and the key areas of due diligence we focus on when reviewing these investments on behalf of our clients. Check out his segment on private credit to learn more.
SaaS-pocalypse?
Software-as-a-service (SaaS) companies have been extremely desirable investments over the last decade. Strong margins, impressive scale, and lower fixed costs have made these companies superstars in both the public and private markets.In Q1, we saw this narrative challenged by significant advances coming out of the AI space. Naturally, significant increases in AI capabilities have led investors to wonder: Is AI going to disrupt these SaaS companies in a meaningful way?
Investment Specialist Joe Diffley outlined our thoughts on how this trend is playing out—and why it’s unlikely to be as fast or as simple some are forecasting.
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