PIMCO tells OHA trustees private credit can boost yield but carries liquidity and policy risks

PIMCO portfolio managers on March 9 briefed the Office of Hawaiian Affairs Committee on Investments and Land Management about private credit, describing it as a large, heterogeneous market that can offer higher income and different risk drivers than public markets. "Investing in private credit means effectively disintermediating the banks," said Jason Steiner, managing director and portfolio manager at PIMCO.

The presentation defined private credit as direct lending by nonbank institutions across corporate, residential and specialty-finance markets. PIMCO summarized the asset class as including direct middle-market lending, nonqualified mortgages, consumer specialty finance (auto, student, home-improvement and solar loans) and commercial real estate lending. The firm noted private credit has expanded since the financial crisis as banks have faced higher regulatory capital costs and some lenders…