"Institutional investors who rushed to put money to work without doing as much due diligence as they would have in a tighter credit environment "are scrambling to look at their risk, at their portfolios, at their exposure," Alberto Gallo, chief investment officer at Andromeda Capital Management, tells Axios. "There is a rush to risk discovery." Meghan Robson, head of U.S. credit strategy at BNP Paribas, tells Axios that the reaction of market participants is "part of being later in the credit cycle.""
"First Brands' collapse stemmed in part from opaque lines of trade credit, or short-term financing that lets companies delay payments to suppliers or borrow against invoices. The company's use of hidden, off-balance-sheet finance made its true leverage and liquidity strain less visible to investors, according to reporting from the Financial Times. Now, clients are asking more questions about trade credit, Robson says, seeing it as another hard-to-track risk."
Institutional investors that deployed capital with lighter due diligence are reassessing portfolios, exposures, and overall credit risk. Credit markets are in a later stage of the cycle, making rising defaults more likely after an extended boom. First Brands' collapse was linked to opaque trade-credit and off-balance-sheet financing that obscured true leverage and liquidity stress. Elevated scrutiny of trade credit is occurring because those exposures can be hard to track. Retail investors pulled substantial money from high-yield and leveraged-loan funds and ETFs, tightening available credit for borrowers. Some strategists view recent failures as one-offs and do not expect a broad private-credit default cycle.
Read at Axios
Unable to calculate read time
Collection
[
|
...
]