In Alternative Views, Private Equity Wire® goes behind closed doors with those in the know to get the latest on private markets. In this episode we discuss Business Development Companies (BDCs) with Jeff Diehl, managing partner and head of investments at Adams Street Partners.
Despite the turmoil surrounding these vehicles, the firm has recently launched a new BDC. Diehl argues that the way to restore some stability to private credit is by offering greater transparency on the “left tail” of the loan book: those loans with a greater downside risk. While the industry is moving towards more frequent valuations as a way to placate retail investors, he believes that only information on these loans can provide genuine transparency.
We discuss launching a BDC in the current environment (0:37); why more frequent valuations is not true transparency (3:40); the performance metrics which BDCs should be disclosing (5:43); why managers make overly optimistic valuations, and how the industry can move towards greater transparency (8:03); what LPs can do to drive transparency (10:56); the challenge retail investors face when it comes to increasing transparency (13:05); the compatibility of retail investors with illiquid assets (15:38); and the coming industry consolidation in private markets (18:13).
