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PDF | Research | Week of Feb 13, 2023

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Quote of the Week

We can now say, I think for the first time, that the disinflationary process has started.

– Jerome Powell, chairperson, Federal Reserve.

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The Numerator Effect

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Over the past twelve months, as Fed rate hikes have taken hold, much attention has been paid to the denominator effect. This is the impact on investors’ portfolios as liquid asset prices have fallen, creating larger-than-anticipated allocations in other areas.

For many the over-sized shares are coming in alternatives. Institutional investors set limits based on policy and risk considerations. Exceeding them, particularly with illiquids, creates challenges not easy to address. Selling non-traded assets or buying more volatile publics whose values could drop further are not great options.

Not enough discussion, in our opinion, is taking place around the numerator effect. No one questions that equities and bonds will eventually recover their values as interest rates settle down and recession worries fade...

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Chart of the Week

Interest Waits

Markets are now beginning to believe the Fed’s message in higher for longer.

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Source: Nuveen, Bloomberg, Goldman Sachs

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Stat of the Week

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Loan Stats at a Glance 

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Contact: Marina Lukatsky / S&P Global Market Intelligence

PDI Picks

Fundraising holds up well

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The volume of capital gathered remained at healthy levels last year, although the number of funds closed sank to new lows...

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Leveraged Loan Insight & Analysis

Downward price flexes in the

institutional market are on the rise

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February has seen an increase in downward price flexes in the institutional loan market with 12 price cuts on first-lien term loans reported so far. This is up from the 9 reported for all January and on par with November...

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Contact: Diana Diquez/ Refinitiv LPC

The Pulse of Private Equity

A decent year in Europe

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European PE activity was stalwart in 2022, at least judging by year-end numbers. PitchBook’s European PE Breakdown paints a resilient picture, estimating small jumps in both deal flow and overall value...

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Contact: Alex Lykken / PitchBook

Covenant Trends 

Percentage of Loans

with Asset Sale Sweep Step-downs

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Contact: Steven Miller / Covenant Review

High-Yield Bond Statistics

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Weekly fund flows source: Lipper
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DL Deals: News & Analysis

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Lofty yields — 12%—

and little supply to pressure unitranche spreads

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Unitranche yields in the KBRA DLD Private Data portfolio averaged 12% for the 90-day period ended Jan. 31, up from 6.6% a year ago. The current reading is the highest in our two-year, $270 billion library and...

Contact: Kelly Thompson /Direct Lending Deals

Private Debt Intelligence

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Private debt deal activity declined over 2022,

large managers can be selective

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The momentum around global private debt deal activity continues to decelerate. The number of deals fell 39.8% in 2022, to 896 deals from 1488 in 2021. Occasional peaks notwithstanding, deal value slowed from a...

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Contact: Megan Harris / Preqin

Debtwire Middle-Market

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Source: Cliffwater Direct Lending Index and BofA Merrill Lynch US High Yield Effective Yield

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Contact: Hema Oza/ Debtwire 

February Update: Middle Market Deal Terms at a Glance

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Contact: Stefan Shaffer / SPP Capital Partners

Select Deals in the Market

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This publication is a service to our clients and friends. It is designed only to give general information on the market developments actually covered. It is not intended to be a comprehensive summary of recent developments or to suggest parameters for any prospective financing opportunity.