Caglar Sabanci’s Post

Interest rate securities remains our preferred asset class from a risk-reward perspective. High starting points for yields, reasonable valuations in credit and a supportive monetary policy backdrop bodes well for fixed income investors.

The global credit cycle is a perpetual force, influencing interest rates, credit availability and capital markets pricing. For core plus fixed income managers looking to balance quality and liquidity versus risk, correctly identifying the drivers of a cycle can be a challenge but can also create opportunity. Learn more in our paper: https://lnkd.in/eiPCi6uE #CorePlus #FixedIncome

A dichotomy which will impact Fixed Income Investors in coming days, is the downward play in the benchmark 10 yr GSec (driven by positive news around index inclusion, attendant FII flows and prudent fiscal behavior) and news around large Banks raising their deposit rates and MCLR (internal lending benchmark rate). On one hand, investor returns in Debt MF, pension funds, insurance etc is expected to trend downwards; on the other hand bank depositors/borrowers are expected to see higher rate of deposits/borrowing. As this game plays out, fixed income investors will be forced to choose between taking additional equity risk or credit risk to generate higher returns. Retail investors will increasingly lock in medium term rates in bank fixed deposits. Curated credit transactions either through credit fund route or direct deals can meaningfully improve Fixed Income return profile for savvy informed investors.

Less Regulated Private Credit Expected To Take Billions in Business Away From Investment Banks - "...Banks are set to lose as much as US$50 billion from annual revenue by 2027, mostly in the US and mostly in corporate and investment banking, according to research from Oliver Wyman and Morgan Stanley. The industry can replace up to US$15 billion of this, mainly through lending more to illiquid private markets, which is already an area of concern for policymakers focused on the risks of shadow banking.... ... the process continues to favour the biggest Wall Street banks, such as JPMorgan Chase or Goldman Sachs Group, that can spend the most on tech and have tight relationships with the biggest private-market asset managers. And that threatens more concentration of financial leverage – and increased risks in the years ahead..." https://lnkd.in/e9S2zYbw

What credit concerns? Why the current bull market credit rally has further to run. While discussions swirl around record high ASX 200 levels and whether equity market valuations are stretched, a shift is underway in private sector debt. With credit spreads on Australian asset-backed securities nearing pre-COVID lows, and investor demand surging, the credit rally paints a promising picture for investors. Uncover why the bull market in credit shows no signs of slowing down. https://lnkd.in/gCnPfK6g

The global private credit market is booming! Private credit continues to emerge as a powerhouse amongst the various asset classes. What are the key headlines to be aware of in the world of private credit, and should we be concerned? 1️⃣ Size Matters: a recent International Monetary Fund study estimated the global private credit industry at a valuation of $2tn. However, alternative sources such as J.P. Morgan argued it could be over $3tn! A big difference in estimates. 2️⃣ Missing Pieces: in some areas of the market, we don't have the whole picture. Key players like Business Development Companies (BDCs) aren't fully accounted for, which is skewing valuations and leaving gaps in our understanding. 3️⃣ Risk Alert: the International Monetary Fund has also warned of market vulnerabilities, especially in a dowenturn, where highly leveraged borrowers might be facing troubles. 🔽 For example, see the graph below showing the fall of private credit interest coverage (a key debt service requirement)... 4️⃣ Opacity Issues: this lack of data and oversight is making private credit a bit of a "murky" area which might raise future concerns about the asset class. 5️⃣ Retail Surge: more retail investors are jumping into private credit - but do they really understand the risks? As private credit surges past $3 trillion, it seems even further scrutiny is essential to prevent potential risks to financial stability. What do you think is the future for private credit?

Are global banks diversifying their assets to combat rising interest rates? DEMICA's 2024 Benchmark Report reveals that 55% of banks are indeed doing so. Meet Demica Chief Executive Matt Wreford, leading the conversation on leveraging non-traditional finance products for asset growth. #Finance #AssetGrowth #SupplyChainFinance

Explore the growing trend of private credit as a smart investment alternative with insights from Tim Keith. In the context of rising interest rates, learn why private credit can provide more than just higher returns compared to traditional term deposits and savings accounts. https://lnkd.in/eNvWxRNb #PrivateDebt #PrivateCredit

🌟 Understanding Coco Bonds: A Powerful Investment Instrument 🌟 Hey there LinkedIn fam! 🌍 Today, let's talk about Coco bonds, an intriguing investment option that benefits both banks and investors. 🏦💼 Coco bonds, short for "Contingent Convertible" bonds, that are convertible into equity if a pre-specified trigger event occurs. 📈 Owing to their capacity to absorb losses, CoCos have the potential to satisfy regulatory capital requirements. So, what's in it for the banks? 🏦 Advantages for Banks: 🔸 Capital Strengthening: Coco bonds allow banks to strengthen their capital position by providing an additional layer of loss-absorbing capacity. This helps banks meet the minimum capital requirements outlined in Basel III. 🔸 Flexibility: Coco bonds offer banks flexibility in managing their capital structure. If the bank faces financial distress, the Coco bonds can convert into equity, bolstering the bank's capital base and ensuring its stability. 🔸 Risk Management: By issuing Coco bonds, banks can transfer some of the risk to investors. In times of economic downturn or financial stress, the burden of absorbing losses can be shared, reducing the impact on the bank and potentially safeguarding the financial system. Now, let's turn our attention to the advantages for investors! 💼 Advantages for Investors: 🔸 Higher Yield: Coco bonds generally provide higher yields compared to traditional bonds, offering investors the potential for increased returns on their investment. 🔸 Potential for Capital Appreciation: If the bank's financial health improves and the Coco bonds convert into equity, investors can benefit from potential capital appreciation if the bank's stock price rises, leading to additional gains. 🔸 Risk Mitigation: Coco bonds help mitigate the risk of a bank's failure by converting into equity when certain conditions are met. This provides some level of protection to investors and contributes to the stability of the financial system. #Finance #Investing #CocoBonds #BaselII

The multi-sector category is offering attractive yields in the mid-to-high single digits, and we believe a multi-sector approach may offer better access to the wide array of opportunities available in fixed income markets #InvestingInvolvesRisk