Per Franzén is taking charge of EQT at a pivotal moment. The Swedish buyout shop is big, with about $140 billion of fee-paying assets under management, but it’s not in the same league as U.S. giants like Blackstone and KKR. The $40 billion company’s biggest gap lies in the racy world of private credit, which EQT quit several years ago. Franzén’s legacy might be defined by whether he manages to reverse that historic decision. The EQT veteran, who currently runs the firm’s main investing businesses in Europe and North America, will take over in May from boss of six years

Credit ratings are one of the important measures for bond investors since these ratings are assessments of the creditworthiness of a borrower, such as a corporation, government, or a specific financial instrument like a bond. These ratings are assigned by privately owned credit rating agencies such as S&P Global, Moody’s, Fitch Ratings, or Scope. They indicate the likelihood that the issuer will meet its debt obligations (interest and principal payments) in full and on time. As a result, credit ratings help investors evaluate default risk, guide interest rates, and influence borrowing costs for bond issuers. More generally speaking, ratings range

The appeal of credit cards is making a purchase now and settling up the bill later. Capital One Financial’s $80 billion merger with rival Discover Financial Services offers a similar benefit. The deal perks will be huge, if and when they can be redeemed. Combined, the two companies would be the biggest U.S. plastic purveyor, with $250 billion of the country’s $1.3 trillion credit-card debts, overtaking JPMorgan’s $211 billion at the end of 2023. Yet customers of the bank led by Jamie Dimon spend more, giving Capital One CEO Rich Fairbank a plausible argument that the deal increases competition rather than squashing

Alternative asset managers and U.S. insurers have come together to create a highly profitable version of pass-the-parcel. Regulators, bank executives and investors warn that this fast-growing alliance could be the source of the next financial crisis. Are they right? Insurers have plentiful safeguards to stop them going off the rails. The problem comes when the market evolves rapidly but rules that keep it in check do not. Apollo Global Management and KKR are among the buyout firms that have wedged themselves into the stodgy world of writing policies by buying control of insurers. KKR said on Wednesday it would buy

Markets on the whole do a decent job of synthesizing information at the micro level, but they often get the macro signals wrong as was noted by Paul Samuelson. In his 1998 paper, Samuelson argued that there is no persuasive evidence that macro market inefficiency is trending towards extinction. One factor behind this inefficiency is that markets can progress at times based on memory rather than a random walk. This has particularly been the case for interest rates since the Greenspan Put was put on steroids in 1998 when Long Term Capital Management defaulted. The so-called Greenspan Put is where

The late economist Axel Leijonhufvud noted in a 1979 essay that the theory of the interest rate mechanism remains at the center of the confusion in modern macroeconomics. All the inconclusive quarrels, he argued, largely stem from this source. While financial market academics continue to argue the merits of their preferred theory – whether it be IS/LM based models, Keynes’ liquidity preference or the loanable funds theory – bond traders have had to deal with the reality of conflicting interest rate signals. The recent dramatic shift in the path of interest rates indicates fixed income markets have become, in the

The US equity market has had a surprising rebound this summer; rallying more than 17% between mid-June to mid-August. The narrative for the first half of the year had been focused on a pending recession, given that a sustained decline in economic output tends to correspond to falling capital values. This narrative has been supported by two quarters of negative real GDP growth, which was inevitable given how high inflation had risen. Despite the fall in real GDP, the growth in nominal wages and nominal output remains robust while inflation finally appears to be falling, as indicated in Exhibit 1.

The biggest threat to the private credit industry comes from itself. Direct lenders like Ares Capital and Apollo Global Management have become big players in funding buyouts thanks to their ability to offer flexible debt packages and generous terms. Now that credit markets have turned, Breakingviews explores whether the $1.2 trillion industry can keep grabbing market share from banks and public markets. Why is private credit so hot? Before 2008, banks generally dominated the world of corporate credit, underwriting debt and either holding it on their balance sheets or selling it to others. New rules introduced after the financial crisis

The “Three Amigos Summit” on Nov. 18 in Washington D.C. appeared to reinforce President Joe Biden’s shift towards Trumpian protectionism. Biden refused to budge from his position of using tax credits to support domestic production of electrical vehicles, potentially damaging over 50 years of voluntary cooperation and trade integration between U.S. and Canadian firms in the automotive sector. On Nov. 24, the U.S. Department of Commerce stated it will impose duties of 17.9% on imported softwood lumber from Canada, which is twice the previous rate of 8.99%. This shift towards protectionism should be of grave concern for investors as less-open

Credit cycle investors have performed on par with the S&P 500 since the beginning of March, with an allocation to US banks followed by US Industrials, generating returns of just over 16%. This performance beat Nasdaq, which increased by just under 12%, global equities at 9% (the UK market also rose by 9%), and US government bonds across all maturities which returned just 2%. Despite this positive performance, many investors remain somewhat skeptical that the US can continue to outperform other international equity markets such as the UK due to the current level of valuations. Exhibit 1: Asset class returns

Credit cycles play a key role in the pricing of financial assets. Throughout history, periodic jumps in default rates – from the railroad crash in the late 1870s, the bank panic of the 1890s and the Great Depression, to the dot-com crash and global financial crisis – have placed downward pressure on asset prices. The reason for this clustering of defaults is related to the nature of the credit cycle. When the return on capital increases faster than the cost of capital, the net result is increased credit creation in pursuit of higher profits. This process leads some firms to

U.S. equity investors in the six year period between 1973 and 1978 would have made no nominal return on their investment, with inflation averaging 7.7%. Hence it is understandable that investors remain so concerned about the potential impact of a higher rate of rising prices. This is why all eyes are currently on the bond market and whether it is signalling a return to the 1970s, and whether firms will be able to maintain and grow profit margins. No need to panic The U.S. February 2021 inflation data showed an increase of 0.4%, resulting in an annualized consumer price index