Nuveen’s private credit teams are cautiously optimistic about where the markets are heading next.
Rising interest rates, inflation, and geopolitical pressures have not undermined the private credit markets. Executives at Churchill Asset Management and Arcmont Asset Management, Nuveen’s private credit shops, say they’re raising plenty of money from investors.
Private credit has “proven to be a great hedge against inflation,” said Anthony Fobel, CEO of Arcmont, in New York on Wednesday. “You see a lot of people rotating out of private equity into private credit.”
And if there is a recession, private credit managers know how to navigate downturns. “Small recessions are not a bad thing,” Fobel said. “What we don’t want is a very heavy recession. Although the opportunity to invest becomes greater, you have to worry about your portfolio companies.”
But Nuveen’s private credit teams don’t expect that kind of downturn. Fobel said that in the absence of a “significant global event,” they’re not really worried right now about a heavy recession.
Right now they’re preparing for a marked increase in deal activity for the remainder of the fourth quarter and into 2024. “The market environment is good for the larger players,” said Ken Kencel, CEO of Churchill.
Part of that optimism is driven by Nuveen’s strategy in credit. Churchill, which operates in the U.S., and Arcmont, which is based in Europe, primarily invest in sponsor-backed deals in more defensive, noncyclical sectors.
It appears to be working. Across some 400 deals, Arcmont has managed to avoid posting a loss. Churchill’s losses have been minimal, roughly 5 basis points per year. Investors like what they see: Churchill raised $6.5 billion so far this year to deploy in the sponsor-backed credit market.
“As long as you choose good businesses, you can weather the storm,” Fobel said.
