Crosswinds in credit markets – Alan Schrager at Oak Hill Advisors

02/07/25 • 25 min

In the latest edition of Credit Exchange with Lisa Lee, Alan Schrager, senior managing partner of Oak Hill Advisors, speaks with Creditflux's managing editor Lisa Lee about the cross-currents in credit markets which is blazing hot with spreads going tighter but there’s issues of tariffs, immigration reform and defaults.

Spreads have gone tighter in many markets, not only credit or private credit, while there's a number of pressures on companies, including tariffs, which Schrager suggests means it's better to invest in higher-quality investments. The spread between “great stuff, good stuff, and bad stuff and terrible stuff” is the tightest it has ever been, he noted.

Of the headwinds, immigration reform will have a greater impact than trade protectionism, he predicts, since the industries that are impacted by tariffs will adjust.

Of the headwinds, immigration reform will have a greater impact than trade protectionism, he predicts, since the industries that are impacted by tariffs will adjust.

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Fortress Co-CEO Drew McKnight Sees Biggest Opportunity in Asset-Based Finance as Banks Seek Liquidity

On this inaugural episode of Credit Exchange, host Lisa Lee sits down with Fortress co-CEO Drew McKnight who sees the best play of 2025 in asset-based finance as banks become increasingly disintermediated. While President Donald Trump's win may loosen bank regulations, banks will still need to comply with Basel III and shore up liquidity to deal with asset-liability mismatches. Fortress is cautious about direct lending, the largest segment of private credit, but optimistic about its future given the improving M&A and LBO climate. Geopolitics remains the looming worry while the incoming Trump Administration could pressure corporate profits with tariffs and wage inflation but result in better outcomes for consumers.

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Private market deals will get bigger – Ares co-head of European credit

In the latest edition of Credit Exchange podcast, Mike Dennis, co-head of European credit at Ares Management, speaks with Creditflux's managing editor Lisa Lee about Ares’s record-setting private credit fundraise for direct lending and opportunities to invest in Europe.

Investors are still excited about the opportunity set in Europe, evidenced by Ares’s EUR 30bn direct lending fund which attracted a historic EUR 17bn of equity commitment that far surpassed the previous record also set by Ares. Private credit gives good yield, low volatility and good quarterly distribution on a quarterly basis, said Dennis.

Dennis sees the private credit market easily able to provide EUR 2bn to EUR 3bn unitranche loans in Europe, which could increase if borrower tap multi-currencies across Europe and US. In the future, these deals will get even bigger. But they will done more on an opportunistic basis when public markets are shuttered – Ares core direct lending strategy is focusing on middle-market companies where the banks are continuing to retrench and there are enough deals to be very selective.

Opportunistic credit business is also an attractive space. Ares looks to provide capital to delever balance sheets or provide growth capital for deals that were inked when interest rates were zero and therefore have capital structures that may no longer make sense.