The private credit sector is braced for a shake-out as increased volatility and rising default rates begin to expose differences among lenders, according to a report by Bloomberg citing the co-chief executives at Fortress Investment Group.
“It’s really hard to differentiate yourself when there’s no defaults,” said Fortress co-CEO Drew McKnight in a Bloomberg Television interview. He added that the economic cycle producing failures means “you’re going to start to see some variance in returns”.
McKnight said cases such as the collapse of Tricolor Holdings and First Brands Group are signs investors are not doing sufficient due diligence on their investments.
Fortress currently have $56bn AUM across credit, real estate, private equity, and permanent capital.
