Monroe Capital’s Ted Koenig isn’t buying that private credit investments can be accurately valued every day.
“Daily marks in illiquid private assets,” he said, “is an illusion of precision, not accuracy.”
The comments come two weeks after Apollo Global Management Inc. began rolling out daily valuations across its roughly $850 billion credit business, a move that is fueling debate at the CAIS Alternative Investment Summit in Beverly Hills this week.
Koenig, Monroe’s chairman and chief executive officer, didn’t name the firm in his remarks at a panel Wednesday, instead taking issue with the idea of daily private credit marks more broadly. But the development at Apollo has unsettled some rivals — and seen as possibly pressuring rivals to follow suit.
“To have actual marks, you need financial statements, you need other inputs that you don’t receive on a daily basis,” Koenig added. “There’s just no way to do this.”
His fellow panelist Drew McKnight, co-CEO of Fortress Investment Group, also questioned how meaningful such frequent updates could be without a deeper assessment of individual borrowers.
“If they are just marking the book towards a leveraged loan index, you can do that daily theoretically just on a spread basis,” he said, “but it wouldn’t show you if the loan is at par unless you’re doing the actual analysis.”
Apollo’s daily pricing, championed by CEO Marc Rowan, comes as the $1.8 trillion private credit market faces mounting questions about how managers value loans that rarely trade.
In September, the US Securities and Exchange Commission sent a “critical reminder” that signaled renewed attention over the valuation of private assets, especially as alternative asset managers seek to reach a broader pool of investors, including US retirement accounts. The regulator emphasized that the absence of readily available market information didn’t diminish managers’ responsibility to determine fair value.
For its part, Apollo has frequently told investors that it envisions private credit to span a much larger $40 trillion universe, which is largely investment grade and accounts for most of its daily valuations. The firm said that it has traded over $30 billion of such loans.
Deals
- Blackstone Inc. is leading a $1 billion private credit financing to back a business combination between the security enterprise solution units of Leidos Holdings Inc. and engineering firm Analogic Corp.
- French private school operator Omnes Education is looking to refinance around €700 million of debt, an effort that will play out against the backdrop of the most serious student unrest in the country in years
- Dental chain Rodericks Dental Partners is talking to lenders to refinance about £360 million of debt in a transaction that may include a payment-in-kind portion
- Boaz Weinstein’s Saba Capital Management took a stake in TCP Capital Corp., BlackRock Inc.’s beleaguered private credit fund
Fundraising
- Tokio Marine Holdings Inc. has agreed to act as lead investor for an emerging-market private credit vehicle originated by the World Bank Group’s International Finance Corp seeking to raise as much as $2 billion
Job Moves
- DLA Piper is hiring three senior lawyers from Latham & Watkins to join its growing capital solutions business as it continues an aggressive push into private credit
Written by: Olivia Fishlow and Dani Burger — With assistance from Rene Ismail @Bloomberg
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