Goldman Sachs Asset Management announced that private credit is having some issues but investors don't care. They're still pouring money into alternatives. The bank used the word "opportunities" to describe what's happening in private credit right now. That's the same word your dentist uses when he finds three cavities.
Private credit has woes. Goldman said so. The woes aren't specified in enough detail for you to do anything useful with this information. But don't worry. Demand remains strong. Translation: retail money is still flowing into products that lock up capital for seven years and charge two-and-twenty on the backend.
The logic here is bulletproof. Private credit has problems, therefore investors want more of it. It's like hearing your neighbor's meth lab exploded and deciding that's exactly where you should cook your meth too. Goldman sees this as bullish. They would. They collect fees whether the credit performs or implodes into a smoking hole of covenant-lite disaster.
Alternatives remain popular because nobody knows how to price them. You can't check the value every day. No price discovery means no panic selling. It's the financial equivalent of not weighing yourself and declaring you're in great shape. Your statement says the investment is up four percent. Is it? Nobody knows. The appraiser works for the fund manager.
Goldman talks about emerging opportunities in private credit like they're rare birds you need binoculars to spot. The opportunities aren't emerging. They've been there the whole time. They're called defaults. Defaults create opportunities for the next guy. That next guy thinks he's smarter than the last guy. He isn't.
Investors remain happy with alternatives because their statements arrive quarterly and use words like "resilient" and "differentiated exposure." Try getting that kind of emotional support from your Robinhood account that updates every f*cking millisecond.
Photo by Markus Winkler on Unsplash
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