From my experiences as a professional investor and having been through a number of bubbles (more as a private investor) I would tend to agree with you.I'm on the investment advisory committee of a non-profit with ~$100M in assets. We have an advisor (a major firm who specializes in non-profits) who charges a very reasonable 0.1% AUM fee. As far as I can tell, and I've asked, that there are no additional revenue sharing or other such agreements.
This firm has been HEAVILY pushing to make private credit a part of our portfolio for a year or so, on the fixed income side, and the board voted to do so last month, against my only "no" vote. My protestations were met by the advisor with the typical counter arguments..."large portion of the market...public debt no longer represents the investable market...yes the risk is higher but we feel the risk to reward ratio is quite high...etc."
I can't figure out why this firm would push so hard if they don't profit? And the only thing I could some up with is that if everyone ELSE uses some private credit, and the returns continue to be higher, that our portfolio would lag relative to our peers and thus the advisor would look suboptimal.
I think it's simply that PC is "hot" right now and no one wants to be accused of being old-fashioned.
If my former comperes are pushing it, then it's probably very late to the party.
Again, analogies to junk bonds. Great to get in in 1982. Not so great in 1989.
Post the crash there will doubtless be a more mature understanding of risk-return for this asset class.
The systemic risks, to financial institutions in general, are of concern. Mostly because they are unknowable, from sitting here.
Statistics: Posted by Valuethinker — Sat Dec 28, 2024 1:49 pm