In 2023, will public debt returns "pale" in comparison to private debt?
resolved Jan 2
Resolved as

On January 4th, 2023 Term Sheet, a well-known financial newsletter by Fortune (typically regarding PE/VC) posted a series of predictions regarding the calendar year 2023.

One of these predictions was the following:

Public debt returns are going to pale in comparison to private debt as new issuance volume will remain depressed for several years until rates are no longer this elevated. As a result, it’s likely that we will see a resurgence of private debt, similar to what happened post global financial crisis, and one needs only to look at what Blackstone, KKR, and other large institutional asset allocators are doing to see where the opportunity lies in the coming year and beyond.” —Nelson Chu, founder and CEO, Percent

I will not attempt to initially define all resolution criteria in this market and will instead attempt to handle any nuances/complications/data feasibility as it arises. If by end of 2023 I think it is not possible to confidently resolve this market in the spirit in which it was intended, I reserve the right to resolve as "n/a".

Any clarifications to the resolution criteria will be listed below, along with the applicable date:

  • [TBU]

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Challenging market to resolve, as private debt returns generally aren't public and I'm not a domain expert. Professionally I saw lots of organizations wanting to explore private debt- or debt-like financing solutions, but these groups generally did not proceed because the cost was too high. This suggests positive private debt performance given the high cost, but I'm also skeptical that much more got done than in prior years.

I checked Preqin - a database for fund investments, and the net IRRs of Blackstone / KKR private debt funds didn't change much in 2023.

Bloomberg and other orgs certainly feel like it was a good year for private credit!

I'm resolving to 75% due to uncertainty & conflicting evidence. Happy to discuss further if anyone else has insight.

bought Ṁ200 of YES

Articles on the subject suggest YES.

I have struggled to find good data for this. If I annualize 2.6 it definitely outstrips public debt returns by a fair margin. But I'm not sure if this is already annualized or even what the baseline public debt comparison should be.

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