Discerning profit from peril in private credit markets

04 September 2019 Craig Boardman

In the first half of 2019, at least $10.7 billion was raised by private debt fund managers, making private credit one of the fastest growing markets driven by expansion in permanent financing vehicles like business development companies (BDCs), direct lending and large syndications led by asset managers. Demand is spurred by reduced bank lending, the search for higher yields and the diversification private credit brings to a wide range of investors including insurance companies, mutual funds, family offices and even retail investors.

Growth in the market, competition for deals and the increasing diversity of types of firms participating creates need for more integrated, real time tools for credit assessment and portfolio monitoring. Especially during volatile markets and the threat of a turn in the credit cycle, the most nimble and best-informed managers are most likely to benefit from the ability to discern profit from peril.

The ability to create a holistic real-time view of credit opportunities and holdings was a driver of our acquisition of Ipreo, which owned iLEVEL, a year ago. Combining the back and middle office expertise of WSO (Wall Street Office) with the credit and portfolio monitoring capabilities of iLEVEL and the private market pricing-, reference- and position data we offer enables us to deliver accurate, up-to-date views of positions and credit fundamentals to the front office, including portfolio managers, credit analysts and CIOs.

In developing this front office solution, we worked closely with private credit managers like Main Street Capital Corporation to ensure credit performance, cash and position data are organized to present maximum insight to the fund manager. The result of this industry collaboration and system integration between IHS Markit and iLEVEL is a unified dashboard experience combining data from the front, middle and back office into a powerful portfolio monitoring tool.

"The integration of IHS Markit assets in the private credit space and the initiative their teams have shown to understand our business solves several significant data challenges and helps us focus more effort on portfolio management and returns for our investors," says Sammy Cashiola, managing director of Main Street Capital Corporation. "The ability to view dashboards on my iPhone and iPad that combine credit models, position data and valuations allows me to keep a pulse on our portfolios anytime, anywhere."

The dashboards simulated here show how credit metrics like leverage ratios, concentration snapshots, and position data come together and enable exposure and risk analytics. Unifying credit and position data makes it easier for portfolio managers and deal teams to understand how new opportunities affect portfolios and the risk tolerance set by the firm.

This integration is just the beginning. With iLEVEL, our deep datasets and other resources, we have the ability to transform how firms execute deals and manage portfolios in private credit. Our vision is to bring together client relationship management, credit analysis, pipeline monitoring, deal execution, position tracking, portfolio monitoring and investor reporting in one seamless experience.

Posted 04 September 2019 by Craig Boardman, Managing Director, Global Head of Strategy for WSO, IHS Markit

IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.