US bond giant Pacific Investment Management Company (PIMCO) said on Monday it expects the next few years to offer the best opportunities for retail credit investors since the global financial crisis.
As banks have become more cautious about lending due to reduced liquidity and regulatory scrutiny, this has created a “gap in credit markets” for private capital to step in, the company said.
Private investors could demand wider spreads and tighter covenants and take advantage of growing opportunities to either acquire senior corporate loans at a discount or refinance companies directly with more flexible credit and capital structures, the report said.
“As private credit investors, this is the environment we have been waiting for,” PIMCO portfolio managers said in a statement. “We believe the next few years will be great vintages for a wide range of investor objectives.
PIMCO, which manages $1.8 trillion in assets, this year began expanding its reach into areas previously dominated by regional banks and increasing its offering of private financing to struggling companies that the banks provide have reduced their lending.
In particular, PIMCO expects reduced liquidity to create opportunities for private credit investors in specialty finance – secured loans to consumers and small businesses – as well as senior corporate loans and commercial real estate.
Within special financing, the asset manager highlights residential mortgage loans, solar and hardware store loans, equipment financing and aircraft leasing.
PIMCO expects that private lenders will be able to provide such financing not only directly to borrowers, but also to banks and non-banks.
And because demand for capital exceeds supply, “in our view, investors will not need to take on significant risks to achieve compelling returns,” PIMCO said.
2023-11-27 20:37:39
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