SCIO News

& Insights

4 min read

May 14, 2024

It started in the US with the precipitous fall of Silicon Valley Bank (SVB). Soon thereafter Europe, not to be outdone, posted a casualty with a balance sheet roughly three times that of SVB – Credit Suisse. Not a fair comparison, in truth, as Credit Suisse had a 128-year head start. SCIO avoids investing in banks, be it via debt, equity, or hybrid securities (eg, contingent convertibles, or CoCos) like the plague, and we’ll explain why in a moment. We will also touch upon the current banking crisis and why the challenges facing banks, especially smaller banks, are likely to grow. Lastly, we will conclude by sharing some ideas as to how investors can better protect their portfolios against the many risks present in today’s market.

4 min read

May 14, 2024

Ultra-Accommodative Monetary Policy is Proving a Windfall for Private Credit

4 min read

May 14, 2024

Diamonds, they say, are a girl’s best friend. For men, it’s a dog. And for private credit fund managers, it’s central banks. Following more than a decade of ultra-accommodative monetary policy, yield-starved investors faced with low/negative interest rates have been forced to accept more risk for less return, driving nominal yields on public credit to historical lows. Private credit, unlike public credit, does not trade and therefore is not directly impacted by monetary policy. This has allowed private credit to largely avoid the negative monetary policy effects seen in public credit, resulting in a significant relative-value divergence between the two. For investors able to hold illiquid assets, we recommend overweighting private credit relative to public credit to increase portfolio returns and decrease risk.