Managing uncertainty - 4th quarter, 2025
Investment Team members Frank Mullen and Claire Thornhill discuss their Q4 2025 commentaries with relationship manager Ryan Hatch. They talk about the lessons they've learned, the benefits of our Investment Team's structure and more.
A few charts worth discussing
“If the market feels expensive to you, you're not imagining things. Across sectors, styles and markets - valuations remain elevated. While there continues to be dispersion within the different categories, buyers today need to be particularly discerning.”
“Banks offering variable-rate, fixed-payment mortgages have been reducing the percentage of their mortgages with amortizations over 30 years. Those were mostly from the post-Covid interest rate increases.”
Other charts worth pointing out
High-yield bond performance by sector
AI funding impact on credit markets
Global oil production by country
Globalisation’s impact on European stocks
S&P 500 Index – post-reporting performance
Emerging market equity ETF inflows on the rise
S&P 500 Index market cap reallocation
Cumulative retail flows into the Mag 7
Central bank gold weights
Short interest in SPY vs. QQQ
Private credit firms sell debt to themselves at record rate
Private credit firms sold a record amount of debt to themselves last year as the buyout sector’s slowdown pushed them to find new ways to generate cash from loans to companies owned by private equity.
Private lenders struck so-called continuation deals worth $15bn globally in 2025, up from almost $4bn the previous year, according to investment bank Jefferies. Such deals involve fund managers establishing new vehicles to buy loans from their old funds.
Many of the rolled-over loans were originally extended to finance leveraged buyouts by private equity managers, Jefferies said, but were taking longer than expected to be repaid due to a lack of deals.
The boom in private credit continuation deals is the latest hangover from a years-long drought in private equity exits, with buyout firms instead holding on to businesses for longer and delaying repayment of those companies’ loans.
Advisers also say the surge in funds raised by direct lending vehicles in recent years has resulted in more activity in the so-called secondary market. It includes both managers selling to themselves as well as fund backers selling on stakes in those vehicles.
Last week Crescent Capital Group closed a $3.2bn continuation vehicle, the largest in the private lending market, which bought a portfolio of loans to private equity-backed companies and other assets from an older Crescent fund.
Backers of credit funds, such as pension plans, also sold more stakes in ageing funds than ever last year, with the value of transactions up from $6bn in 2024 to $10bn.
The spike in continuation vehicles comes as investors, concerned over credit quality following the bankruptcies of First Brands and Tricolor, have pulled back from some of private credit’s biggest funds in a blow to one of the fastest-growing areas of finance.
This week’s fun finds
Why Is Ice Slippery? A New Hypothesis Slides Into the Chat.
The reason we can gracefully glide on an ice-skating rink or clumsily slip on an icy sidewalk is that the surface of ice is coated by a thin watery layer. Scientists generally agree that this lubricating, liquidlike layer is what makes ice slippery. They disagree, though, about why the layer forms.
Three main theories about the phenomenon have been debated over the past two centuries. Earlier this year, researchers in Germany put forward a fourth hypothesis (opens a new tab) that they say solves the puzzle.
But does it? A consensus feels nearer but has yet to be reached. For now, the slippery problem remains open.
