Erik Hirsch on Schwab Network: April 13

Sam, great to be back with you. I think what I would say is we need some perspective. I think that's what's missing right now. I think you've got too much investor activity, particularly in the wealth sector, being driven by scary headlines and not being driven by good fundamental data. So, if you look across the private markets, what do we see? Private credit portfolios by and large look strong. That's not to say everyone's portfolio is in perfect shape. They're not. But by and large, the sector in total looks very healthy and very strong. The venture sector right now is on fire. A tremendous amount of activity going on in the AI space and venture is really fueling a lot of that infrastructure. We don't need to remind your audience about what the infrastructure needs are around this globe. What's happening in Iran right now, tragic as it is for those that are being negatively impacted, is really shining a light on the fact that a lot of countries need to domesticate energy sources and that is going to get largely financed by the private market. So I look around today and I see a lot of green shoots, a lot of positive activity.

Sure. So I think if you look at the private credit space you're first of all you're talking about hundreds and hundreds of funds that are operating around the globe. If you look at it over decades you've had over 7,000 private credit funds in operation over the last several decades. The funds that are getting the attraction right now in the headlines are mostly Evergreen and BDC. So these are funds that have a semi-liquid or liquid facility to them and those are again they're managed by a variety of managers who have taken a variety of different approaches to portfolio construction. So some of those portfolios much more kind of risk on further out the spectrum on technology exposure, software exposure. Some of those portfolios very much risk off. And so right now I go back to the perspective word. The headlines are painting with this very broad brush that everyone's private credit portfolio looks the same. And I'm here to tell you as the person who has the data, nothing could be further from the truth. One of the things you see in the private markets is that dispersion of performance across managers is very wide. It's wide today. It was wide 10 years ago and it was wide 25 years ago. That isn't different. When you have a lot of different fund managers operating in a space, they're not all equally talented and they don't all make equal decisions. And so investors should expect that you're going to see some dispersion. So part of this is on investors to make good choices as to who they're partnering with and who they're investing with. But private credit in total well north of a trillion dollars in assets. A portion of that is exposed to the software space. But a portion of that is also exposed to things like manufacturing or retail or rolling up businesses or industrial pieces. So those all carry very very different risk profiles. And we have to go back to sort of rather than the big broad brush, let's talk about managers and what they've actually done with their portfolio.