Is Private Credit Special? | Rational Reminder 305

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Private credit is one of the fastest-growing asset classes, and today we take a closer look at
why that is, and if it’s really worth the hype. When you invest in private credit, you are
essentially lending money to borrowers who might have difficulty accessing loans elsewhere.
While these assets may be profitable, they can also incur a lot of risk and typically come with
illiquidity. It is traditionally traded among institutional and accredited investors, rather than retail
investors, namely, non-professional investors. Since private credit has gained so much
popularity in recent years, we use today’s conversation to unpack how private credit works, the
role of private credit funds, the associated performance fees and risks, and what retail investors
should know about this asset class before deciding to invest. Our conversation investigates one
of the top reasons for private credit’s rise in popularity, namely risk-adjusted returns, before
evaluating whether this is a worthwhile reason to invest, depending on who you are. Stay tuned
for our after-show section where we discuss the proposed changes to the capital gains tax, why
the death of value could be exaggerated, and more!
0:00:00 Intro
0:02:49 Main Topic: Private Credit
0:38:29 Main Topic 2: Capital Gains Budget Changes Revisited
0:42:46 Aftershow
Links From Today’s Episode:
Rational Reminder on iTunes - itunes.apple.com/ca/podcast/t....
Rational Reminder Website - rationalreminder.ca/
Rational Reminder on Instagram - / rationalreminder
Rational Reminder on X - / rationalremind
Rational Reminder on UA-cam - / channel
Rational Reminder Email - [e-mail]
Benjamin Felix - www.pwlcapital.com/author/ben...
Benjamin on X - / benjaminwfelix
Benjamin on LinkedIn - / benjaminwfelix
Cameron Passmore - www.pwlcapital.com/profile/ca...
Cameron on X - / cameronpassmore
Cameron on LinkedIn - / cameronpassmore
Mark McGrath on LinkedIn - / markmcgrathcfp
Mark McGrath on X - / markmcgrathcfp
Money Scope Episode 12 - moneyscope.ca/2024/04/19/epis...
Money Scope Episode 13 - moneyscope.ca/2024/04/26/epis...
David Chilton - thewealthybarber.com/
David Chilton on X - wealthy_barber?la...
Books From Today’s Episode:
The Wealthy Barber: Everyone's Commonsense Guide to Becoming Financially Independent -
www.amazon.com/Wealthy-Barber...
Papers From Today’s Episode:
‘Direct Lending Returns’ - rpc.cfainstitute.org/en/resea...
‘Risk Adjusting the Returns of Private Debt Funds’ - www.nber.org/papers/w32278
‘An Inconvenient Fact: Private Equity Returns & The Billionaire Factory’ - papers.ssrn.com/sol3/papers.c...
‘Reports of Value’s Death May Be Greatly Exaggerated’ - papers.ssrn.com/sol3/papers.c...

[@victormanuelmendezfonseca6033]

It would be great to have a slide or a tldr with the conclusions of the episodes

[@piranhaa2]

Great content, as always guys! It's always refreshing to hear about less common, illiquid, asset classes that are pitched with more upside than there may be.
And it's nice to see some SCV premiums! I lucked out and started investing with the RR 5 factor portfolio in 2021, which I probably never would have without your guys' content. Huge thank you for all the work you've been doing to educate individuals about investing.

[@dumpsterdiver6415]

What´s that background noise? :(

[@zackjensen4484]

private credit investor here. If you do private credit against real estate assets at low LTVs (70% or lower), it is my view you are generating alpha. Prove me wrong please!

[@thomas6502]

Great listen as always. Keep up the great work, and... er, grate yards. ;-)

[@lipsontajgordongrunk4328]

Is that rational reminder zipper sweater for sale?

[@AForEh]

In their pitches, they talk about how it’s uncorrelated to public markets…well yeah if you don’t allow your clients to sell, of course it’s going to look uncorrelated.

[@cyclingphilosopher8798]

Content is great, but the relaxed tone somehow reminds me of SNL's Delicious Dish.

[@mordet2]

Has there been a way to invest in global small cap value?

[@rimservices]

ISVL, for example

[@wandaespana2577]

AVDV and AVES

[@slyanover]

Use infinite banking to invest in private credit.

[@AForEh]

Howard Marks got paid handsomely by Brookfield

[@pavlosaikevych]

We demand the picture of kids yard of Ben property

[@stevekehoe875]

Private credit funds with the lowest cost of capital do produce alpha. Certainly, on average, TANSTAFL.