Private debt doesn’t offer high enough returns to justify the growing risks, according to Pimco. “Fundamentals are deteriorating in more levered portions of the credit markets,” said Mohit Mittal, chief investment officer for core strategies at Pimco. “You’re seeing more complacency, so you have to be very thoughtful, you have to be very careful.” Investment-grade direct lending pays only half the premium needed to compensate for worse liquidity than in public markets and rising fundamental concerns, Mittal tells Bloomberg News’ James Crombie and Irene Garcia Perez, and Bloomberg Intelligence’s Steve Flynn in the latest Credit Edge podcast. Mittal and Flynn also discuss the outlook for the telecoms and cable media sector, including consolidation and deleveraging.

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Schroders Capital is seeing growing interest in private debt from investors looking to diversify as returns in public markets decline. It’s finding the best relative value in commercial real estate where over-exposed regional banks can no longer lend. “The most interesting opportunity, I think is looking where there’s emotional bias and fear,” says Michelle Russell-Dowe, co-head of private debt and credit alternatives at the asset manager, in the latest Credit Edge podcast. Schroders also likes residential real estate and equipment finance, Russell-Dowe tells Bloomberg News’ James Crombie and Bloomberg Intelligence senior credit analyst David Havens. Russell-Dowe and Havens also discuss new investors in private credit like retail, high-net-worth individuals and family offices.

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Blackstone Inc. expects private credit to balloon to $30 trillion in size, fueled by the energy transition, housing and data center lending. “We’re really expanding the opportunity set from quite a narrow part of the market to really a mainstream part,” said Rob Horn, global head of infrastructure and asset-based credit at Blackstone. “Not only can we get hard-asset collateral — which differs from what they get in the public market — but we also get a premium return,” Horn tells Bloomberg News’ James Crombie and Bloomberg Intelligence senior credit analyst Tolu Alamutu in the latest Credit Edge podcast. Horn and Alamutu also discuss the outlook for residential real estate. “It’s still going to be a decent year, despite the fact that we have this troubling geopolitical risk backdrop,” says Alamutu.

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