The narrative that private lenders get superior information is challenged. Large public asset managers like PIMCO have excellent management access, while private market disclosures can be stripped-down, less regulated, and use weaker auditors, undermining the information advantage claim.
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Traditional VC reliance on "differentiated networks" is obsolete as data sources and professional networks are now commodities. To compete, modern VCs must replace this outdated advantage with proprietary intelligence platforms that algorithmically source deals and identify the right signals for where to focus time.
Company investor relations teams want stable, long-term shareholders. Funds known for 5-10 year holding periods become preferred partners for management, providing deeper insights and a research edge unavailable to short-term hedge funds or index funds.
Private credit allows investors to act like chefs—deeply involved from ingredient sourcing (diligence) to final creation (structuring). Liquid market investors are like food critics, limited to analyzing the finished product with restricted access to information, which increases risk.
Despite headlines blaming private credit for failures like First Brands, the vast majority (over 95%) of the exposure lies with banks and in the liquid credit markets. This narrative overlooks the structural advantages and deeper diligence inherent in private deals.
The absence of daily pricing in private credit removes an essential discipline. Mark-to-market in public markets acts as an honest, early warning system that forces managers to scrutinize underperforming assets, a mechanism private lenders lack.
PIMCO's competitive advantage lies not in predicting daily market fluctuations, but in its ability to execute massive, complex deals. Its scale allows it to take on transactions like a $25 billion data center financing, creating unique opportunities inaccessible to smaller firms and establishing a significant structural moat.
The two credit markets are converging, creating a symbiotic relationship beneficial to both borrowers and investors. Instead of competing, they serve different needs, and savvy investors should combine them opportunistically rather than pitting them against each other.
As a Limited Partner (LP) in the same PE funds they lend alongside, Neuberger accesses direct, unvarnished reporting on a portfolio company's performance. This provides a more honest view of a business compared to the polished materials prepared by a sell-side investment bank during a sale process.
The key question for institutions isn't "how do we access the best managers?" but "what is unique about us that facilitates privileged access to assets or managers?" This shifts the focus from picking to leveraging inherent advantages.
The primary risk in private markets isn't necessarily financial loss, but rather informational disadvantage ('opacity') and the inability to pivot quickly ('illiquidity'). In contrast, public markets' main risk is short-term price volatility that can impact performance metrics. This highlights that each market type requires a fundamentally different risk management approach.
