We could talk at length about what we saw and heard on stage and in the hallways, but nobody’s got time for that, so here are five big takeaways:

1. Liquid markets are all messed up, and private credit is more stable

If we’ve learned anything from the past 18 months or so, it’s that you should never underestimate the capacity of liquid markets to turn on a dime. This is a ready-made marketing pitch for direct lenders. 

“There are lots of moments in time when the syndicated loan market trades below 95,” said John Kline, president and CEO of New Mountain during a SuperReturn panel. 

“If the loan market trades below 95 it's pretty much shut to sponsors which is bad for business. You contrast that with direct lending and we're almost never shut for sponsors.”

2. We’re going to need a bigger definition

Private equity might be old hat, but so are certain parts of private credit — like pure-play direct lending, for example (Jess Larsen of Briarcliffe Partners touched on this on our podcast recently).

In recent weeks, we’ve reported on Pemberton, Hunter Point and AllianceBernstein raising funds for NAV lending, as well as Fortress raising an $8bn credit opportunities fund and Blue Owl seeking $2bn for a similar strategy. Asset-backed lending is also increasingly coming into focus, touching on everything from consumer finance to music rights. 

“The simple term private credit is far too broad to actually encapsulate everything that a variety of managers participating in this event can actually provide,” said Matt Freund, managing director and co-portfolio manager at Barings, on panel at the conference.

3. SMAs are becoming more popular 

Private capital firms are increasingly courting high-net-worth investors — the industry has even come up with its own accreditation for investment advisors (here’s what happened when one of our reporters took the test).

But there’s a middle ground between big institutional funds and vehicles designed for HNW, and it’s getting bigger: SMAs (otherwise known as separately managed accounts). 

Tyler Gately, head of client portfolio management for Barings Global Private Finance, said investors are more focused than ever before on working with managers that can deliver custom solutions to meet their needs. 

Within the SMAs that Barings has recently structured, every investor was “looking for something slightly different”, said Gately: some might want rethink fee structures, while others may want to express different views on relative value across geographies or parts of the capital structure.

4. There are more and more layers in the private capital cake

Private credit secondaries (by which we mean investors selling stakes in private credit funds, as opposed to lenders trading individual private credit loans) is growing. To provide just one example, JP Morgan Asset Management is looking to raise such a fund. 

Rick Jain, global head of private credit at secondaries firm Pantheon Ventures, said that in 2017 the firm tracked around $3bn of secondaries deal flow; last year, that number had grown to a whopping $22bn.

Generally speaking, secondaries vehicles provide liquidity to LPs. But GP-led secondary transactions are also increasing, according to Jain: he said GP transactions make up 30% of Pantheon’s deal pipeline, but 40% of its total executed deals. 

This reflects growing pressure on borrowers as interest rates rise. “It’s always good to diversify your channels of opportunity,” he said of GPs seeking new secondary buyers.

5. PIK coupons are just a fact of life now

Interest coverage is falling, and cash conservation is increasingly important. As such, Kline at New Mountain predicted that the next big trend in unitranche lending will be PIK and cash combo deals — for example, a loan where the coupon is 70% cash pay and 30% PIK.

“You’ll synthetically create the unitranche PIK with one big fat unitranche,” he said, noting that this strategy would be more suited to established businesses as opposed to riskier upstarts.

This reflects a broader merging of stressed financing tools with traditional performing credit products. Junior capital is increasingly popular these days. 

“One of the benefits of higher interest rates is an opportunity for junior capital to come in to well performing credits that are at a little lower value,” said James Athanasoulas, a managing director at HarborVest.