Private credit roundup: Private markets face renewed scrutiny over liquidity and valuations

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Today 13:45

 Liquidity concerns have resurfaced across private markets
 Partners Group offered investors a cash route via listed vehicle
 Medallia highlighted pressure on software buyouts
 Valuations, redemptions and exits face scrutiny

    June 19 (Reuters) - Liquidity concerns in private markets resurfaced this week as Partners Group PGHN.S offered investors in a listed private equity vehicle a route to cash, while Medallia's restructuring highlighted pressure on some software buyout loans made during the low-rate era.
The developments highlight a growing mismatch in private markets, with firms selling access to illiquid assets to a wider range of investors even as questions persist over how quickly those assets can be sold and how reliably they are valued.
Partners Group proposed giving investors in its London-listed private equity vehicle a new route to cash by allowing up to 30% of its issued share capital to move into a realisation share class, which would return money over time as assets are sold.
The move is not a private credit redemption event, but it adds to scrutiny of liquidity across private-market vehicles after some semiliquid private credit funds faced redemption requests above their stated limits.
Separately, a consortium led by Blackstone, Apollo Global Management and FS KKR Capital Corp, said it would take control of indebted software company Medallia from private equity manager Thoma Bravo, wiping out about $5 billion in equity for Thoma Bravo and its co-investors.
Medallia's restructuring underscores pressure on some software deals struck during the low-rate era, as higher debt-servicing costs, slower growth, increased competition and technological disruption weigh on capital structures.
Investor confidence in private-market valuations has become increasingly important as private assets move further into wealth-management portfolios.

    Morningstar's wealth division has partnered with Apollo Global Management APO.N, Franklin Templeton BEN.N and JPMorgan Asset Management to develop public-private model portfolios for financial advisers, with initial allocations of about 12% to 20% to private credit and real estate through interval funds.
Institutional interest is also rising in emerging-market private credit, although exposure remains limited. A Gemcorp survey found 42% of institutional investors plan to increase allocations to the asset class over the next two years, while 40% currently have no exposure.
Regulators are increasing scrutiny. The Bank of England is running a stress test to see how non-bank and bank financial institutions active in private markets would perform in a severe but plausible shock. It has outlined a severe stress scenario involving a geopolitical shock, a deep global recession, a 4% contraction in the UK economy and rates rising to 7%.
The Bank of England's key rate is at 3.75%.
The focus on valuations has prompted some managers to increase disclosure. Apollo CEO Marc Rowan said in May the firm would begin reporting daily pricing of its direct lending and asset-backed finance assets to fund investors.
But market participants say better pricing does not create liquidity. Secondary trading remains limited, and many direct loans require borrower consent before they can be transferred.
Analysts say these developments highlight a broader trade-off: As private assets enter more portfolios, growth may hinge as much on confidence in valuations and exits as on fundraising.

Software loans make up a sizable share of some BDC portfolios https://reut.rs/3QoF88Z
(Compiled by Patturaja  Murugaboopathy; Editing by Hugh Lawson)
((patturaja.muruga@thomsonreuters.com;))