Africa’s broken heart

Congo is sliding back to bloodshed

How to stop a catastrophe




NO CONFLICT since the 1940s has been bloodier, yet few have been more completely ignored. Estimates of the death toll in Congo between 1998 and 2003 range from roughly 1m to more than 5m—no one counted the corpses. Taking the midpoint, the cost in lives was higher than that in Syria, Iraq, Vietnam or Korea. Yet scarcely any outsider has a clue what the fighting was about or who was killing whom. Which is a tragedy, because the great war at the heart of Africa might be about to start again.

The cause of the carnaje

To understand the original war, consider this outrageously oversimplified analogy. Imagine a giant house whose timbers are rotten. That was the Congolese state under Mobutu Sese Seko, the kleptocratic tyrant who ruled from 1965 to 1997. Next, imagine a cannonball that brings the house crashing down. That cannonball was fired from Rwanda, Congo’s tiny, turbulent neighbour. Now imagine that every local gang of armed criminals comes rushing in to steal the family jewels, and the looting turns violent. Finally, imagine that you are a young, unarmed woman who lives alone in the shattered house. It is not a pleasant thought, is it?

Mobutu and his underlings looted the Congolese state until it could barely stand. When a shock struck, it collapsed. The shock was the Rwandan genocide of 1994. The perpetrators of that abomination, defeated at home, fled into Congo. Rwanda invaded Congo to eliminate them.

Meeting almost no resistance, since no one wanted to die for Mobutu, the highly disciplined Rwandans overthrew him and replaced him with their local ally, Laurent Kabila. Then Kabila switched sides and armed the génocidaires, so Rwanda tried to overthrow him, too. Angola and Zimbabwe saved him. The war degenerated into a bloody tussle for plunder. Eight foreign countries became embroiled, along with dozens of local militias. Congo’s mineral wealth fuelled the mayhem, as men with guns grabbed diamond, gold and coltan mines. Warlords stoked ethnic divisions, urging young men to take up arms to defend their tribe—and rob the one next door—because the state could not protect anyone. Rape spread like a forest fire.

The war ended eventually when all sides were exhausted, and under pressure from donors on the governments involved. The world’s biggest force of UN blue helmets arrived. Kabila’s son, Joseph, has been president since his father was shot in 2001. He has failed to build a state that does not prey on its people. Bigwigs still embezzle; soldiers mug peasants; public services barely exist. The law counts for little. When a judge recently refused to rule against an opposition leader, thugs broke into his home and raped his wife and daughter.

Mr Kabila was elected for a final five-year term in 2011. His mandate ran out in 2016, but he clings to the throne. He is pathetically unpopular—no more than 10% of Congolese back him.

His authority is fading. He can still scatter protests in the capital, Kinshasa, with tear gas and live bullets. And few Congolese can afford to take a whole day off to protest, in any case. But in the rest of this vast country, he is losing control. Ten of 26 provinces are suffering armed conflict. Dozens of militias are once again spilling blood. Some 2m Congolese fled their homes last year, bringing the total still displaced to around 4.3m. The state is tottering, the president is illegitimate, ethnic militias are proliferating and one of the world’s richest supplies of minerals is available to loot. There is ample evidence that countries which have suffered a recent civil war are more likely to suffer another. In Congo the slide back to carnage has already begun.

Beyond Africa, why should the world care? Congo is far away and has no discernible effect on global stockmarkets. Besides, its woes seem too complex and intractable for outsiders to fix. It has long had predatory rulers, from the slave-dealing pre-colonial kings of Kongo to the Kabila family. Intrusive outsiders have often made matters worse, from the rapacious Belgian King Leopold II in the 19th century to the American cold warriors who propped up Mobutu for being anti-Soviet.

Nonetheless, the world should care and it can help. Congo matters mainly because its people are people, and deserve better. It also matters because it is huge—two-thirds the size of India—and when it burns, the flames spread. Violence has raged back and forth across its borders with Rwanda, Uganda, Angola, South Sudan and the Central African Republic.

Studies find that civil wars cause grave economic harm to neighbouring states, which in Congo’s case are home to 200m people. Put another way, if Congo were peaceful and functional, it could be the crossroads of an entire continent, and power every country south of it with dams on its mighty river.

If outsiders engage now, the slide back to war may yet be held in check. First, cuts to the UN peacekeepers’ budget, made partly at President Donald Trump’s behest, should be reversed.

The blue helmets are not perfect, and cannot protect remote villages. But they can protect cities and are the only force that Congolese trust not to slaughter and pillage. Second, Mr Trump’s welcome sanctions against Mr Kabila’s moneymen—building on earlier embargoes on conflict minerals—should be extended. Donors should press Mr Kabila to keep his promise to hold elections by the end of the year, and not to flout the constitution by running again. In this, they should make common cause with sensible African leaders. The Congolese opposition should take part in the vote, instead of boycotting it.

A flicker of hope

The omens are not all bad. South Africa has just dumped Jacob Zuma, who indulged Mr Kabila’s claim that Western pleas to uphold Congolese law were imperialism. (Mr Zuma’s nephew reportedly has oil interests in Congo.) Cyril Ramaphosa, Mr Zuma’s successor, is honest and pragmatic. Just as Nelson Mandela was repelled by Mobutu, and hastened his departure, so Mr Ramaphosa is surely repelled by Mr Kabila. He has experience negotiating the end of bad things, including apartheid, Northern Ireland’s troubles and Mr Zuma’s presidency. He must not let Congo go back to hell.


Japan’s North Korea Strategy: A Solid Defense

By Phillip Orchard

 

Japanese Prime Minister Shinzo Abe isn’t having the best Olympics. Over the weekend, at a meeting with South Korean President Moon Jae-in ahead of the opening ceremonies, Abe’s goal was to secure a commitment that Seoul would resume joint military drills with the U.S. after the Paralympics end in March and to sustain sanctions pressure on Pyongyang, while refraining from spiking a 2015 accord intended to resolve lingering animosity over Japanese abuses in World War II. According to South Korean media, Moon told Abe not to meddle in the South’s “sovereignty and internal affairs,” and essentially sent Abe to his room to think about Japan’s past bad behavior.

Abe also had to watch as the nascent detente between the two Koreas picked up pace, culminating with North Korean leader Kim Jong Un inviting Moon to an inter-Korean summit in Pyongyang. During his meeting with the North Korean delegation headed by Kim’s sister, Moon reportedly declined to press Pyongyang to denuclearize, heightening concerns among the U.S., Japan and hawks in South Korea that Moon’s government may be laying the groundwork to weaken sanctions pressure on the North and potentially extend the temporary freeze in U.S.-South Korea joint exercises. Adding apparent insult to injury was yet another show of support from the Chinese for South Korea’s pursuit of reconciliation with the North, stoking concern that Beijing is succeeding in using the Korean crisis to drive a wedge between Seoul and its stalwart allies.

All of this highlights an uncomfortable reality for Japan: It is perhaps the country most vulnerable to a nuclear North Korea – including even South Korea – but also, of all the key players involved in the standoff, the one with the least ability to independently shape the outcome of the crisis. It’s a peripheral player and likely will be until the crisis is settled one way or another. But it’s also on a path to ensure that it doesn’t find itself confined to the sidelines in this sort of situation again.
Seoul Keeps Its Enemies Closer
The weakness of Japan’s hand is reflected in the peculiar dynamic that has emerged between South Korea and the two rivals on its flanks.

Seoul’s apparent embrace of Beijing while giving the cold shoulder to Tokyo may seem mystifying. After all, it was China that implemented informal economic sanctions on South Korea last year over Seoul’s decision to go forward with the U.S. deployment of the THAAD ballistic missile defense system – a strategically dubious (and ultimately futile) attempt to coerce Seoul into prioritizing Chinese security over its own in the middle of a crisis.  During a high-profile visit to Beijing last fall, when the two sides made a show of unity by jointly declaring that war could not be allowed on the peninsula, Beijing signaled that it would continue to inflict economic pain on the South whenever it strayed from Chinese wishes – despite Seoul agreeing to refrain from additional THAAD deployments. And it’s China that is helping keep the North Korean regime afloat more than any country, except possibly Russia, by blocking U.S.-led attempts to strengthen U.N. sanctions on Pyongyang, particularly with regard to oil imports.

Yet South Korea has reportedly remained reluctant to implement parts of a landmark intelligence-sharing pact with Japan brokered by the U.S. in 2016. Some of this has to do with Seoul’s lingering resentment over Japan’s prewar occupation of Korea and unease about Japan’s growing determination to shed its postwar pacifist constraints. Some of it has to do with the perception that Japan is acting merely as a U.S. proxy to pave the way for a U.S. military operation on the peninsula over Seoul’s objections – a move that would put the South Korean capital region at risk of massive North Korean shelling. But mostly it has to do with the fact that China simply matters more than Japan in the current crisis.

That said, Chinese influence in Pyongyang has waned considerably since Kim Jong Un came to power. Though China has thrown its rhetorical support behind Moon’s detente with Pyongyang, it’s unclear what Beijing could really do to push talks toward a resolution that both it and Seoul would find acceptable. China’s overriding goals are to expel the U.S. from the peninsula and to ensure that a friendly, or at least not overtly hostile, government rules the North. These, along with the long-term threat China poses to South Korea, limit how far Seoul can align itself with Beijing in the current crisis – especially if Seoul succeeds in persuading the U.S. to refrain from a unilateral operation to disarm the North.

Nonetheless, Beijing still has as much leverage over North Korea as anyone. Even if it cannot bring Pyongyang fully to heel without harming its own core interests on the peninsula, it at least has some latent ability to alter Pyongyang’s cost calculations and, if enough stars align, potentially help the North Koreans save enough face to be willing to stand down. At minimum, China doesn’t want to see a war on the peninsula that puts U.S. forces on the Yalu River and a pro-U.S. government in Pyongyang, which means Beijing certainly isn’t going to try to thwart Seoul’s efforts to forestall a conflict through dialogue. This makes Seoul’s alignment with Beijing at this stage low risk. As was made clear when Vice President Mike Pence said that the U.S. was open to talks with the North without preconditions, at this point, “maximum pressure” and dialogue need not be seen as automatically conflicting.

Japan, in comparison, just doesn’t have the ability to either substantially further or frustrate Seoul’s objectives. Of all the relevant players, it has the least leverage over Pyongyang. It cannot yet act on its own militarily to eliminate the threat, as its slow remilitarization is still in its very early stages. Even new landmark procurements that would give it at least limited ability to strike the North, such as long-range cruise missiles, are expected to take years to complete. The best it can do for the foreseeable future is align itself with the U.S.

Thus, to South Korea, Japan may either lend a helping hand or become a threat, but at the moment there’s little downside to pushing Tokyo on politically explosive but strategically unimportant issues such as wartime “comfort women” and tiny islands in the Sea of Japan. In fact, it’s convenient to do so at a time when Moon is facing heavy criticism from South Korean conservatives and widespread public skepticism about his hearty welcome of the North Koreans at the Olympics.
Japan’s Long Game
To be clear, Japan can be a pivotal player in support of how the U.S. and South Korea decide to proceed. The Americans would lean heavily on Japanese help to facilitate and contain the fallout of a U.S. military operation. Short of war, Japan could play a valuable role in implementing a blockade on the North. It’s already using its diplomatic and economic influence across Asia and beyond to quash North Korea’s efforts to circumvent sanctions. If and when everyone simply decides to live with a nuclear North, Japan’s superb intelligence, submarine warfare, anti-ballistic missile systems and anti-mining capabilities would be invaluable in deterring Northern aggression.

But no country with Japan’s combination of untapped power and inherent vulnerabilities would be content with the role of good team player executing someone else’s strategy indefinitely. Tokyo is certainly not sitting on its hands. Japan may not have many options today, but it’s moving to ensure that it doesn’t find itself in this sort of situation in the future.

This is why Japan has been spearheading efforts to lay the groundwork for a tightened defense framework anchored by Australia and India, while also gradually ramping up security and economic assistance to strategically important ASEAN states locked in territorial disputes with China. Alongside this effort, Japan has also been the driving force behind the revival of the strategic Trans-Pacific Partnership, that, despite appearing dead following the U.S. withdrawal early last year, appears set to be finalized by the remaining 11 members later this year. Finally, at home, Japan is moving methodically to shed legal and political constraints on remilitarization, while slowly building up military capabilities that will give it greater ability to step out from under the U.S. security umbrella and secure its vital interests farther afield.

None of these efforts appears ready to come to fruition quickly, whether due to conflicting interests among the regional states Japan is trying to shepherd toward tighter cooperation, or due to powerful and unpredictable political currents at home. Nevertheless, the disquieting realities exposed by the Korean impasse – the limits of U.S. power in the Indo-Pacific, uncertainties about whether South Korea will remain a part of the U.S.-led alliance structure, and Chinese disinterest in working to preserve the established order – have certainly helped them gain traction. In this way, being confined to the sidelines in today’s crisis may ultimately help Japan get where deeper geopolitical forces are urging it to go.


Cash Is King—and a Harbinger of Doom?

By Lewis Braham   

Cash Is King—and a Harbinger of Doom?
Photo: Getty Images


Stephen Yacktman is still officially on a stock-buying strike. “We’ve been willing before to go down with the ship and say, ‘We’re not going to invest your money,’ ” the co-manager of the AMG Yacktman fund says. “If you don’t like it, sell the fund. We’re willing to be fired.”


Today, Yacktman’s $8.5 billion fund (ticker: YACKX) has more than 25% of its assets in cash, and even after the market’s recent slide, he hasn’t been buying. “When you look at valuations today, to go back to a normal valuation the market would have to fall by more than half,” he says. Some investors have indeed fired him for refusing to budge. The fund has experienced $1.2 billion in outflows in the past year as its 13.2% return in that period has trailed the market by 3.5 percentage points, and its fully invested peers, by 1.9 points.




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Yacktman didn’t anticipate this month’s correction. Nor does he much care how the market overall performs: “We don’t hold the cash because it’s a risk-mitigation tool.” Rather, he’s one of a dying breed of active managers who hold cash as part of their valuation discipline. Managers used to hold cash to handle redemptions, but now they can use exchange-traded funds as a liquidity tool—making the decision to hold cash more about investing strategy than fund administration, says Russel Kinnel, Morningstar’s director of manager research. “A small-cap fund can buy a small-cap ETF; the ETF is still liquid [and can be sold to meet redemptions], but you’re not lagging the market,” he says.

Trailing the market is a bigger concern in an environment where investors are increasingly shifting to low-cost index funds and managers face “career risk”—Wall Street’s euphemism for getting fired. So managers herd into stocks even when they think they’re overvalued. According to Morningstar, in 1997 the average U.S. stock mutual fund held 5.4% cash. That dropped to 3.5% at the end of 2007—right before the last crash—and fell further to 2.4% at the end of 2017.

Some old-school money managers care nothing about career risk. “The view of risk of dinosaurs like me is that risk is about business risk or valuation risk or the risk of putting your money with people who are not good stewards,” says Joel Tillinghast, manager of the $41 billion Fidelity Low-Priced Stock fund (FLPSX).

Tillinghast’s fund is one of the few to often hold significant amounts of cash, yet it has still beaten its mid-cap benchmark and its peers over the past one-, three-, five-, and 10-year periods. Its cash levels were 11.4% of its portfolio at the end of October, according to Morningstar, although that has fallen to slightly below 10%, Tillinghast says.

Of 2,258 diversified U.S. equity funds, only 111 have 10% or more in cash—and their recent performance has been poor. Just 18% of those with five-year records have beaten their peers as of Feb. 10. Go back 15 years to include the 2008 crash, and the outperformance number jumps to 48%.

COULD WE BE REACHING A POINT when cash won’t be trash again? Rarely will a money manager admit they’re timing the next market crash, but Kinnel says there’s an implicit market call when managers start to build cash because they can’t find any investment opportunities. In the week ended Feb. 10, when the Standard & Poor’s 500 index fell 5.2%, 78% of these cash-heavy funds beat their peers.  
Tillinghast is actually more bearish on U.S. stocks than his current cash position indicates. He has a 38% position overseas, where he says valuations are more attractive, most notably 10% in small Japanese stocks. “Japan is earlier in its up cycle,” he says. Meanwhile, little looks cheap at home: “The average price/earnings ratio for the cheapest 20% of stocks in the U.S. market today is about 18. That’s higher than the cheapest 20% during the growth stock bubble of 1999 and 2000. That’s deeply frustrating.”




Still, Tillinghast was willing to cross the picket line and buy some stocks during the February correction. “I wouldn’t say we loaded up the truck, but we packed the minivan in the last few days,” he says. “We bought a couple of financial and energy company stocks. Retail is another area where we are finding some attractive stocks, but you seriously have to pick over every company because some of them are going to be killed by Amazon.com [AMZN].” Retailers Ross Stores (ROST) and Best Buy (BBY) were the second- and third-largest positions in the fund as of the end of December.

Despite beating its peers, Fidelity Low-Priced Stock has suffered $6.2 billion in outflows in the past 12 months, according to Morningstar. Tillinghast acknowledges that the cash is useful for meeting redemptions, although he would be open to using an ETF substitute if market conditions were right. “It makes sense if you think the index an ETF tracks is undervalued,” he says. “I think the stocks I have actually chosen are more undervalued than the index.”

Not every manager with cash is value-oriented. “We have high-beta stocks in the portfolio,” says Hans Utsch, manager of the $5.8 billion Federated Kaufmann fund (KAUAX), which had a 14% cash position at the end of 2017, yet has beaten 95% of its peers in the past five years. High-beta stocks are those that move up and down more than the market. “I figure we’re neutral with the market, with about 15% cash.” Still, Utsch argues, “we’re again in bubble territory.” Cash is his way of being prepared for when the bubble inevitably pops.


Europe’s Poverty Time Bomb

Edoardo Campanella



MADRID – The poor don’t often decide elections in the advanced world, and yet they are being wooed heavily in Italy’s current electoral campaign. Former Prime Minister Silvio Berlusconi, the leader of Forza Italia, has proposed a “dignity income,” while Beppe Grillo, the comedian and shadow leader of the Five Star Movement, has likewise called for a “citizenship income.”

Both of these proposals – which would entail generous monthly payments to the disadvantaged – are questionable in terms of their design. But they do at least shed light on the rapidly worsening problem of widespread poverty across Europe.

Poverty represents an extreme form of income polarization, but it is not the same thing as inequality. Even in a deeply unequal society, those who have less do not necessarily lack the means to live a decent and fulfilling life. But those who live in poverty do, because they suffer from complete social exclusion, if not outright homelessness. Even in advanced economies, the poor often lack access to the financial system, struggle to pay for food or utilities, and die prematurely.

Of course, not all of the poor live so miserably. But many do, and in Italy their electoral weight has become undeniable. Almost five million Italians, or roughly 8% of the population, struggle to afford basic goods and services. And in just a decade, this cohort has almost tripled in size, becoming particularly concentrated in the country’s south. At the same time, another 6% live in relative poverty, meaning they do not have enough disposable income to benefit from the country’s average standard of living.

The situation is equally worrisome at a continental level. In the European Union in 2016, 117.5 million people, or roughly one-fourth of the population, were at risk of falling into poverty or a state of social exclusion. Since 2008, Italy, Spain, and Greece have added almost six million people to that total, while in France and Germany the proportion of the population that is poor has remained stable, at around 20%.

In the aftermath of the 2008 financial crisis, the probability of falling into poverty increased overall, but particularly for the young, owing to cuts in non-pension social benefits and a tendency in European labor markets to preserve insiders’ jobs. From 2007 to 2015, the proportion of Europeans aged 18-29 at risk of falling into poverty increased from 19% to 24%; for those 65 and older, it fell from 19% to 14%. The share of young people now experiencing severe material deprivation, at 12% of the total population, is almost twice that of the elderly. As Christine Lagarde, the International Monetary Fund’s managing director, noted at the World Economic Forum’s meeting in Davos this year, young Europeans “are putting their dreams on hold.”

Although the current economic upswing could partly reverse the trend in youth poverty, the structural factors underlying the problem will remain. Workers’ skills can deteriorate irreparably during stints of long-term unemployment, or can suddenly be rendered obsolete by rapid advances in technology. For many poor people, re-joining the workforce will either be impossible, or it will require them to settle for precarious, low-paid jobs that leave them vulnerable to the next downturn. According to the OECD, 14% of the working-age population in Spain and Greece in recent years was employed but still in poverty.

In unequal societies, resources can be redistributed from the very rich to the rest through progressive taxation, monetary transfers, and salary caps. But eliminating poverty requires more than merely reapportioning the economic pie. The poor also must be re-empowered and reintegrated into societies that have pushed them to the margins. Ultimately, it is not just a matter of political stability and economic fairness, but of human dignity.

Looking ahead, Europe’s welfare states will need to be reformed to address current realities. The elderly are no longer the most economically vulnerable members of European society, but they still receive the largest slice of the pie. Governments should reduce pension benefits in favor of the poor, the unemployed, and the young. These three groups, which often overlap, are in desperate need of financial assistance, skills training, and family-friendly policies.

European governments should also overhaul their tax systems to make older workers contribute more, offer fiscal incentives to companies that hire disadvantaged workers, and move toward establishing an EU-wide poverty-insurance scheme. And entrepreneurs and private firms should invest more in social programs in the communities where they are active.

While Berlusconi (who is barred from running for office) and Grillo have homed in on the problem of poverty, their proposed solutions are nothing more than short-term fixes. A basic-income scheme might provide some immediate financial relief to the poor, but it would not address the structural causes of poverty. Even worse, because neither proposal seriously encourages the unemployed to seek work or training programs, the poor could end up reliant on state assistance forever. And it is not as if such policies would be budget-neutral. Rather, they would have to be funded by politically unpopular tax increases or spending cuts.

Still, as Berlusconi and Grillo have made clear, Europe’s leaders can no longer afford to ignore the poverty problem. They will have to offer real solutions, not simplistic schemes. As oblivious elites often learn the hard way, the poor will endure their lot only for so long.


Edoardo Campanella is a Future of the World Fellow at the Center for the Governance of Change of IE University in Madrid.


The Rise of Private Assets Is Built on a Mountain of New Debt

Credit businesses have helped drive the private-equity industry’s expansion but things could get awkward when companies hit trouble

By Paul J. Davies


CREDIT APPROVAL
Assets under management in global private credit funds




In the world of private deal making, the biggest borrower in town is becoming one of the biggest lenders too. With so much money chasing buyout opportunities, big and risky deals seem the likely outcome.

A major change in financial markets in recent years is that private-equity firms have increasingly got into lending to buyouts, too—and often to their own deals. Their credit businesses are adding to the huge growth in specialist private debt funds and retail money that has taken place in loan markets since the crisis.

The flood of money into credit has driven down borrowing costs and cleared out traditional lender protections known as covenants on many loans.


POPULAR COMEBACK
Issuance of collateralized loan obligations



It is also starting to lift debt multiples on newer deals. Blackstone’s recent deal for a controlling stake in Thomson Reuters’s financial information arm includes debt worth about 7.5 times earnings before interest, tax, depreciation and amortization. That is approaching precrisis levels.

The growth of debt operations at firms like Blackstone, KKR and Apollo is an important part of their expansion. They can manage loans in private-credit funds, special vehicles known as collateralized loan obligations, or CLOs, and listed business development companies, or BDCs.

Private-credit funds run by major specialists like Alcentra or Hayfin, as well as the big private-equity firms, had nearly $650 billion in assets under management globally as of last June, three times more than in 2007, according to Preqin, the research firm. Retail loan funds manage about $100 billion. CLOs and BDCs add billions more.

Blackstone Chairman and CEO Stephen Schwarzman speaks in September 2017. Photo: Mark Lennihan/Associated Press


Investors like loans because they have floating interest rates—unlike bonds, which have fixed rates. That means loan investors don’t lose out when interest rates rise. But that can be bad for borrowers, who are hit by higher debt costs, especially if rates rise sharply.

Private equity’s growing involvement in private debt can make things awkward if a company gets into trouble and a firm’s credit and equity teams are on opposite sides of a workout.

Industry executives say their credit funds are never the lead lender to their own companies: That should allow their credit funds to take a back seat to the biggest lenders in any talks and avoid conflicts of interest. But their investors may still end up unhappy with the outcome.

PAYING UP
Default rates on U.S. leveraged loans



Apollo will buy the debt of companies it owns if they get into trouble, but uses the same fund that holds the equity. That avoids internal conflicts, but can provoke fights with others. Its ultimately profitable restructuring of Realogy , the U.S. real-estate brokers, for example, involved legal battles with other lenders.

Other firms invest separately. Blackstone’s credit funds don’t lend to its deals, but its CLOs can buy the loans of its companies. Carlyle allows its credit funds to take about 10% of its portfolio companies’ debt, while KKR allows up to 30%. The firms say their credit funds aren’t forced to buy debt if they don’t like the terms, nor do they influence the pricing to make the debt more advantageous for their equity funds.

The big firms’ private credit businesses are clearly adding to the volume of money chasing deals. As the market heats up this approach means they risk losing on the credit and equity side after the next buyout bubble.