Hey, it's Steve Eisman. So today we're going to interview two guests, two old friends: Glenn Schorr, Dwight Collins. I call this depth and breadth. Glenn is the analyst at Evercore who covers the investment banks, asset managers, alternative asset managers, companies like that. And Dwight is the head of sales at Autonomous, which is a boutique firm that specializes in financial companies. So Glenn has great depth on the companies that he covers, and Dwight basically covers everything. So depth and breadth.
And what are we going to talk about today? We're going to talk about the topics that are on everybody's minds, which is what in the world is going on in private equity and private credit. People are literally freaking out. Some of these stocks like Blue Owl were down 30, 40, 50% this year. People are wondering whether there's going to be a terrible credit cycle. They're worried about the fact that companies like Blue Owl and Apollo might be overexposed to lending to software companies. Everybody's worried about what's going on with AI and software. And so we're going to explore that. We're going to explore what's going on a little bit in payments, and we're also going to explore some of the sectors that have gotten hurt from rumors about AI.
Hi, this is Steve Eisman, and welcome to another edition of The Real Eisman Playbook. And today we're going to be discussing with two guests, Glenn Schorr of Evercore and Dwight Collins of Autonomous, about everything that's going on in the financial services sector, because well, there's a lot going on in the financial services sector this day. So before we just talk, Glenn, tell everybody what you do. Dwight, tell everybody what you do. Go ahead, Glenn.
Sure, thanks. I'm Glenn Schorr. I work at Evercore for the last 13 years. I've been a sell-side analyst for 27 years trying to follow in the footsteps of the great Steve Eisman. I cover most capital market-sensitive financial companies, so from the big banks and the big brokers to the traditional asset managers, to the trust banks and the private markets asset managers.
Dwight Collins with Autonomous, co-head of the US business, also run our sales desk. Been at Autonomous for, going on, similar to what you just noted, 13 years. Glenn and I go way back, as do you and I, Steve. Always a pleasure to be here.
All right, so let's talk about the most boring aspect of what's going on in our world: private equity, private credit. Glenn, let's just do the facts first, because not everybody knows. Tell everybody what happened to Blue Owl last week, because private credit's been going through a period, I would say over the last year, where people were just—the business has exploded. It's now 1.8 trillion in total size. People worried about, you know, are the loans going to be bad if there's a recession, etc. But last week there was specific news on Blue Owl that freaked people out. So why don't you just tell everybody what happened first?
I'm sure it was a busy Friday for you.
No doubt, no doubt. And it takes a little more background than that, but I'll try not to go too much into history, but—
Go wherever you want to go.
So, first, the derivation of this is for a fund that is about 1% of their total assets. But the market is taking, "Wait, is this a window into everything private credit?" Because if you look back in September, October, November, there were a lot of headlines coming across the tape on private credit having issues. We actually had bank loans, some broadly syndicated loans that a couple were turned out to be fraud—
Correct. But those weren't private credits; those were bank loans.
But the natural reaction was to shoot the private credit stocks.
Anyway, because there's this notion that some people have that private credit, those loans do take on more risk to get more yield, and that if and when we start to get into a credit cycle, that they'll have worse losses. And so that's the background for some of the moves that we've seen. So there's a BDC—
Business Development Corporation, which is public.
Correct, which is basically a bond fund, a loan fund, if—
It has a stock ticker, but when you peel back the onion, it's just a bond fund.
Correct. And so it has a bunch of private loans in it.
And this is run by Blue Owl.
Run by Blue Owl. Lots of managers have BDCs, both public and private versions. And this one particular fund has been around for over nine years. And the plan was always—and paying, let's just call round numbers, 9 or 10% type yield, and basically, you know, we haven't had a credit cycle in about 17 years. So these funds were all performing great, right? I like 9-10% yield and no losses. Sounds like I keep about 9 or 10% of the yield. So now we're getting to a tighter period of time and people are a little worried. Interest rates come down a little bit, and people are more concerned about credit for lots of reasons: tariffs, AI, the economy in general. So any little wobble that goes on in the credit markets, people look to private credit of maybe they're the ones that are left holding the bag. And unfortunately, if you have this environment where there's really low losses and then there are some losses, it could be a normalization to a still-low level—
But that could be an increase in losses of 100%.
Just on a percentage basis.
Correct. Or it could be we're on our way from 1% to 10% losses, if you want to be extreme. And so without knowing, people are very in the mood to shoot first and figure it out later. So anyway, they decided, "Maybe we should—" Yes, thank you. They decided, "Let's move, let's merge this little BDC, this $1.7 billion fund that's 1% of our assets, let's merge it into the big BDC"—
Which is private. Now, the problem is they wanted to do that at a discount because the stock was trading at a discount.
Wait, wait. They were going to move 1.7 billion of a public entity whose assets are ostensibly at par, and they were going to move it into a larger entity whose assets are being discounted by 20%. So if the merger went through, those people who had the 1.7 billion in assets just got haircut 20% because of the merger.
The end conclusion is correct, is that they said, "Hey, I got great news for you. We're going to give you 80 cents for the dollar," and people are like, "What?" And so they're like, "Just kidding." Then they call that off because it got some really bad press. It was ill-timed. In their defense, they started the process when things were closer to par. And when things drifted below because of First Brands et al, and public BDCs were traded at 80 cents on the dollar, they were like, "Ah, let's push through on the merger," when with the benefit of hindsight they should have called it off.
And they freaked out and they cancelled the merger.
So they cancel the merger, it goes away, things recover, we move on.
That was like late last year.
Last week they decided, "We have a solution for this OBDC II thing. Let's sell off a bunch of the assets and return some money," because remember, these funds, you can get if you redeem, you can get up to 5% of your money back—
And so they said, "All right, let's sell." They decided, "Let's sell 35% of the assets." And they got par for them. They sold them to three pension plans and one insurance company. They got their mark 99.7, so they got par for them. And they said, "We're going to give you, instead of 5%, we'll give you 30% of your money back. We'll accelerate some of that, and then we'll work out of the rest of the fund. So we won't give you the 5% redemptions anymore."
So no more quarterly redemptions, but we just gave you 30% of your money back.
Correct. "So we accelerate that, and these assets pay down. They have coupons, they have maturities, short enough duration—two, three-year type loans. You stick with us, and over the next couple of years you'll wind up getting your money back." They thought they were doing a good thing. They really did. And the market, no likey. The market said, "Wait, you got par. You obviously sold the stuff that you can sell. I'm going to assume that you can't sell that stuff. So now it's a bucket of crap, I don't want to own it." And so that what started the—you know, the one more wrinkle to it.
There were four buyers. So there was OMERS, which is a Canadian pension. There was another Canadian pension. There was CalPERS. So those are—that's arm's length transactions.
But the fourth buyer was Kuvare Insurance, and Blue Owl controls the asset management arm of Kuvare Insurance. So one could argue that some of the loans were basically sold to themselves at par and they set that price.
So I tell you what, the press went bonkers on this, and so did some investors. And if this was the only entity and you didn't have any transparency to pricing and there wasn't a third-party verification, I could see people getting upset. I actually don't have a big issue with that. They don't own the insurance company, they don't control the insurance company—
The insurance company's asset management arm.
They bought the insurance company's asset management arm, and so they manage the money. They have an IMA, investment management agreement, for them.
So what? These pension plans are not giving away money. They're not paying a price that they shouldn't pay for these assets. They're paying the other three.
Correct. So let's go back to the market. What they're really unhappy about is they thought they sold the good assets and they didn't sell assets that they couldn't get their mark for.
I'm not saying they're bad. I'm saying the market was worried about it.
And so I don't think that part of it—I know it got a lot of press; I don't have much of an issue with that. I don't think you can go stuff assets into a regulated entity and think that's not going to be a problem at some point. In other words, Apollo, a couple weeks prior, bought in ARI, which was their commercial mortgage REIT that was trading at like a 25% discount. They bought the entire 9 billion of assets in and they put the entire thing into the insurance company they own. And it got some press, and noticed not one person in the commercial mortgage loan market said a peep, because they thought the assets were worth par and they took it into par.
Okay. Dwight, what are you hearing about all this stuff? I mean, you must be on all day long about this.
Yeah, I mean, I guess a couple quick things. Great thoughts, Glenn. I think it was a 10-year-old fund, right? And the idea was always to IPO it, merge it, or run it down. And it's not like there's a performance issue, and they're doing the right thing. I think it's more the perception issue, which is acute for Owl and the alts in general, because it's all about flows, right? And Owl in particular are very dependent upon retail flows. So, you know, I think you kind of have to separate a little bit like is there a credit issue versus like is there just a general flow problem? And I think that's one of the concerns, no doubt, is that as these headlines emerge—and another one today, not that it's necessarily related to Owl, but this MFS, this UK mortgage company.
Oh, what happened? I don't know what happened there.
Another case similar to Tricolor and First Brands, where it was a fraud, double pledging of assets.
This was in the UK. So today the judge ruled that insolvent. Apollo had some exposure, Jefferies, Wells. Some of the headlines hit, so it hit all these stocks. But I think I bring it up just in the sense of like there's general concern around like is there more to come? And I think as it pertains to Owl and some of the alts around you, especially the retail-sensitive ones, just around flows, right? What is that dynamic? As the retail investor is like, "I don't want to touch this"—
And all of a sudden, "I want my money back," and there's a surge in redemptions and it limits the inflows.
I also found interesting some of the statistics out there that something like 20% of private credit is basically to buy out of software companies, and so that the private credit world is overindexed to software. And as we all know, every single day basically software stocks go down and people are freaking out, and that's one of the other worries.
Yeah. Can I add something to that? I do this myself. The entire world does this. We should define when we're talking about private credit what we're talking about versus the issues right now that we've been talking about are direct lending. Direct lending is a real component of private credit, but it is one strategy within private credit. Direct lending is making a direct loan to a sponsor-backed, a private equity-backed company—
Correct, that piece of the business.
So if Blue Owl or KKR or Blackstone or whoever was going to buy a software company, somebody else is going to lend them the money to buy it.
Correct. And by the way, at an LTV of like 35%.
So they have a lot of equity cushion. They lend the money for someone that's buying the company on the equity side.
And that piece of direct lending is overindexed to tech and software in general because that's where the growth has been for the last five years.
So again, direct lending, so BDCs and direct lending funds, that is their business, and that's why we're talking about this now. But there's a much bigger pie included in private credit: there's real estate credit, there's infrastructure debt, and there is asset-backed finance that is mostly investment grade backed by real assets that are under the private credit four-letter word, but they're actually in pretty good shape and have different character.
That's a good point, because one of the things that often comes up is like if you're worried about private credit, you should be really worried about private equity.
Because it's a zero. If you're worried you're going to lose 10 cents on that loan, the equity is probably zero.
Zero, exactly. And that's private equity's company.
Yes. Okay, just for the viewers to understand, the direct lending business is basically: I'm KKR, I go buy a company, whether it's software or infrastructure. I put up X amount of equity and I borrow the rest, and maybe I borrow it from Blue Owl. But if the company that I own can't pay back the loan, then of course the equity that I own is worthless. So if I'm worried about the loan side, I should also worry about the private equity side because the equity goes first.
And let me even give a numeric example in two different things, one software and one food company. Glenn's beef jerky company that I aspire to launch one day. So my beef jerky company is pretty straightforward, run-of-the-mill company. Someone goes to buy it and they think it's worth $150 million, please. They will put up 100 million of equity and the lender—Blue Owl, Apollo, whoever—will lend 50, right? And the 50 sits in the top of the capital stack, meaning any money that gets paid out gets paid out to the lender first, right? And you need to lose almost all of that equity before the lender loses a penny.
Got it. Okay. Dwight, how much pushback are you—what are you hearing from your—you talk to clients all the time, investors. What are you hearing from all these people? People must be hysterical.
I think Warren Buffett always talked about three buckets when he thought about investing: the yes bucket, the no bucket, and the too-hard bucket. And I think for the alts right now, it kind of falls into that too-hard bucket.
A lot of moving pieces. Obviously we talked about the credit angle, we talked about the flow angle, and then the complexity of the institutions, right? There's a lot of different assets that they're invested in, a lot of different assets they lend into. If you pull up a press release or earnings report, it takes a little while to get through. There's complex sources of revenue, and some of those sources of revenue are just all over the place. And while good companies, I think in this environment where you're just dealing with this daily kind of inflow of headlines, it falls into that Buffett "too hard" kind of category.
Okay, so you're not finding any clients willing to step up to the plate to buy these stocks right now?
Towards the end of last year there was hope around, particularly as you thought about kind of a capital market super cycle and you looked at the performance of Goldman and Morgan and a lot of the M&A boutiques, then you looked at the kind of disconnect versus the alts. It was kind of this, "Whoa, shouldn't they?" Particularly the private equity ones or the ones more geared towards private equity. "Geez, these seem like a good opportunity just given the realization pipeline." I think as we got out of the gates in early 2026 and the group continued to stumble, it became an, "All right, I just need to back away."
Okay. All right, let's move on. Go ahead.
I don't think we should. Let me do one thing before we move on.
The stocks trade as if the private markets aren't a thing anymore, that no one will put money into these products anymore. And I do think it's important to think about direct lending approaching a potential credit cycle. And I say potential because the losses really aren't there despite these frauds that we just said. But even 17 years in a credit cycle, maybe things slow even though the banks are telling you they're not. Right?
Direct lending are bullet maturity, meaning you don't get your money back as a lender until the maturity of the loan. So you get a coupon and then hopefully you get your money back at the end. People feel less good about that. And in the retail channel, I could see those flows slowing more than just this quarter. There are so many other asset classes and strategies across private markets that I do think the stocks are acting like those things will never be a thing again either, and they're wrong on that. They're just flat-out wrong.
It doesn't mean there couldn't be slowing in different products. But let me just give you a for instance: 86% of companies in the United States with 100 million or more of revenue are private. They are staying private much longer than they ever were before because they can get financed in the private markets or by banks in ways they couldn't before, and the lending spreads are pretty tight. So you don't need to go public and deal with idiots like us if you can finance yourself and grow your business without having to add on that cost and annoyance.
And then mutual funds have overnight deposits. Banks have overnight deposits. A lot of these funds have long-duration capital. Insurance companies, long-duration capital. Pension plans, long-duration capital. Sovereign wealth funds, long-duration capital. If you're going to finance your data facility for the next 30 years or you're going to get government financing, which all have huge deficits that want to finance their defense budgets, they must be financed with the help of private markets—
Because it's long-duration money.
Correct. That's it. And so there is some baby out with the bathwater that goes on. Picking price at times like this is so impossible. No one cares. They're in the too-hard bucket, like Dwight said, right? But make no mistake about it: they will rise again. They will generate a ton of capital flows again.
Go back. Last thing: '05, '06, and '07 vintages in private equity stunk for a lot of managers, and people thought it was the end of private equity. Go read the newspapers. And then private equity quadrupled since then, right? So direct lending is having this moment, particularly in the wealth channel, where no one wants to touch it and it has outflows and we will have some credit losses. I'm just saying, look at the entirety of what these companies do.
So Dwight, let's turn to you because there were some headlines last week. I mean, I was looking at my screen and I was tapping it because some of the price movements were so insane for certain types of stocks that don't—for example, tell us what happened last week about AI with respect to insurance brokers and wealth management. It was insane. Stocks like that don't move like that.
And obviously the AI bogeyman is fully out there. I think for financial investors, we saw that firsthand last year with how the info services companies traded, and that's put in that bucket: LSE, FactSet, S&P, Moody's, names of that ilk where there became real fear around disruption and disintermediation that obviously spread significantly in 2026 so far. Last week there was the scare on insurance brokers.
Tell everybody what that scare was, because I think I completely understand it.
Yeah, I think OpenAI had approved—it's a company I believe out of Spain that had launched some AI insurance app and it was approved on OpenAI's platform.
But I think really we're at this stage where anything kind of AI-related, could be even a quick press release, is having these significant ripple effects. I mean, the insurance brokers were down like 10-12% that day.
Huge moves across the board. Huge for those stocks. Those stocks, if they move 2%, it's big.
Yeah, it's tricky, right? And you saw it also with some of the retail brokers where there was another kind of AI-related headline that hit Schwab, LPL Financial, Raymond James, and the group more broadly. It's tricky, right? Because for a lot of us, you look back at the release of, say, for example, the iPhone, and at the time it's like, okay, this is amazing new technology. And then it's not until years later do you realize like, whoa, there was a lot of disruption that kind of came with it.
I think some estimates are 15 to 25 different business sectors were disrupted ultimately. You think about BlackBerry. You think about the GPS side, the Garmins, the TomToms. You think about the rise of Uber and Lyft and how yellow taxis went away. You think about what the camera did with the iPhone and how Kodak essentially disappeared. So I think there is this realization that there's something real here—
But we don't really know what it is.
But we don't know what it is. And I think using some of the recent examples, and that's why I bring up the iPhone, this kind of real fear around like, "Do I have my head in the sand? In a year from now or two years from now, there is real disruption risk to these businesses." And I think that's why you kind of have this panic fear.
Now that being said, I think as we think about insurance brokers or retail brokers, I mean, largely these AI platforms are tools. They're tools for the broker. They are tools for that financial adviser. I mean, insurance brokers sell very complex insurance without a doubt into the commercial—this is not, we're not talking about auto insurance. Aon, Marsh McLennan, they service commercial insurers. I mean, they may have AI tools—
But they're still—they're the ones who are going to be selling the insurance for the big insurance companies. So I didn't understand those headlines at all.
Yeah, I agree. I mean, I think again, you kind of have to separate the fear from what could ultimately be the reality. And I think a lot of these companies talk about like, "Yes, we're partnering with AI companies. We're using a lot of the platforms to make our brokers, to make our advisers even sharper." And I think that's the tricky part, is around how much is business-enhancing versus how much of it is business-disrupting. I struggle to see the true disruption risk for the retail brokers and for the insurance brokers—
Or for Visa and Mastercard, which also were down last week.
Yeah. You agree on that, Glenn?
Glenn, what do you think?
Well, I've had my moments during this AI awakening—I don't know, like potential hysteria, but at least somewhere between awakening and hysteria. And there are certain moments that do remind me of the financial crisis. There are some moments that do remind me of pre-pandemic, and I'll take a minute to talk about that. And then there's things that I very much agree with. So hear me out. We won't go through the whole story, but there were two people in my life that knew exactly what was happening in the mortgage landscape, and it was you and it was my buddy Andrew Ho and John Paulson, and they were sitting at the table telling me what's happening and I was grasping it and I knew it—
was real, but I couldn't get the whole thing. I didn't understand the full leverage. And sure enough, things happened, and things melted down, and thankfully the government was able to step in and stop the bleeding because the financial system was melting.
And by the way, you had the people that were close to the action telling me, and I'm capable of understanding, and it was close, but I couldn't fully digest it. In the pandemic, I remember watching what was going on through November, December of '19, and in January, a couple of days before my kids went back to school, we had a family dinner with another family and I said, "You guys might not be going back to school. We might be working..."
On that same exact day, I called my son who was in college and I told him to get on a plane to come home because I said, "If you don't get on a plane to come, you're not coming home." So my family and the other family laughed their butts off at me, made fun of me. They went back to school, and then four weeks later, they were home.
And so imagine what a biologist in Wuhan knew in January before March 12th when all the companies sent us home. So, what I would say is when I'm seeing all this AI stuff and when we read some of these well-written papers, go talk to anybody that's an actual software engineer, anybody that's downloaded Claude and bought themselves an iPad mini and that has been coding when they've never coded in their lives. And you ask them how they feel about AI, they sound like the biologists in Wuhan before.
I'll challenge that a little bit.
I mean, I've been reading a lot. There's no question that AI makes it a lot easier to create software. What I think people are missing is that there's a lot more involved in a company buying a software product than someone just showing up and saying, "Here's my software product." I mean, it's got to be integrated into the company. It's got to be used. It's got to be tested. I think the cost of software is coming down, but that doesn't necessarily mean these companies are being disintermediated.
That's a very, very good point, and actually that's huge for private credit, by the way. Because when we go back to our capital stack and we go back to the duration of these loans, all they need to do is be paid back at maturity. And remember, these companies that they're lending to, this is not venture capital. They're lending to high margin, high free cash flowing companies with built-in revenues, right? And you just got to make it to the finish line and get your money back,
Okay, but to your point, at minimum AI feels amazingly efficiency producing for lots—
And for the companies that we all cover, they're going to save a lot of money, but it also is deflationary and it will cause some jobs in places. And so then that's an impact on the economy, and that's what you've seen in some of these reports.
All right, let's move on to bank M&A.
Where do you stand on bank M&A?
Hope it happens. Needs to happen.
We've been waiting 30 years.
We have. I think for the last big M&A cycle, we think about big juicy premiums and this is kind of, you know—
That goes back to the '90s.
Yeah, or the early '00s. And so I think for a lot of grizzled financial or bank investors, you think about those golden heydays where it's that 30% premium, you break out the coverage map and like, "Oh, it makes total sense." I think there had been real hope that we could kind of get back to that environment, particularly in a much more lax regulatory environment, particularly with capital positions in a good place for a lot of the banks. But so far, while we've had activity, it just really hasn't had—
It hasn't been a tsunami.
It hasn't been a tsunami and it really hasn't been the juicy premiums that you would have hoped for.
