Private Equity And AI

 

First Brands, Tricolor and Market Financial Solutions are what one can call normal rate of failures in the high risk loan portfolio, with lending interest rates of 7 % to 15 % on average that the largest private equity and private credit firms hold. Those failures and the halting of redemptions from Blue Owl's OBDC II fund after paying out circa 600 million USDs to investos are the main reasons the largest private credit asset managers lost more than 40 % of their market capitalization from the recent peaks.

No solvency problems for the private equity, private credit industry up till now, though.

Some Wall Street analysts estimate that the exposure to predominantly mid sized technology firms and also to artificial intelligence, AI data centers forms about 20 % of the portfolio exposure of the largest private credit, private credit firms. The indirect technology exposure could even reach 30 % other largest private equity, private credit firms' portfolio.

In short, if the AI boom turns into bust, private equity and private credit firms' exposure to the sector could cause solvency problems for the private equity industry. 

Yes, the private equity, private capital industry does not need much capital, but it still needs to pay salaries and bonuses and support large real estate offices and computers, etc.