Disconnect in markets and real economy opportunities (with Dani Burger)

Economy okay at headline but higher defaults, stuck assets in PE/real estate/private credit. Software loans fall off a cliff; real economy (industrials, chemicals, manufacturing) offers better opportunities. Pipeline of distressed opportunities exploded to $365B.

implicit

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Strategic Value Partners 8.2
Hedge Fund
Victor Khosla 8.5

Disconnect in markets and real economy opportunities (with Dani Burger)

yields

Higher rates for longer causing stress; distressed opportunities exploding implies rates remain elevated.

Dani Burger

Are there red/amber flags under the surface?
Victor Khosla

Real disconnect: economy okay at headline but higher defaults; PE, real estate, private credit are constipated. Many canaries in the coal mine.
Dani Burger

What is the canary in the coal mine?
Victor Khosla

Stuck assets because people can't get the price they want; lines of redemptions that can't be met are obvious canaries.
Dani Burger

What is the big disruption if people won't mark down?
Victor Khosla

Slowly starting; SVP lends at 15%+ to help hold assets, buys over-levered equity, converts debt to equity. Pipeline exploded from $75B to $365B; $6-7B invested.
Dani Burger

Does this go beyond software?
Victor Khosla

Zero exposure to software; software falls off a cliff. Focus on real economy: industrials, chemicals, manufacturing, consumer products, real assets (power plants, airplanes).
Dani Burger

Is AI/data center crowding out creating opportunities?
Victor Khosla

Data centers are voracious capital users; crowding out is real. Real economy assets need fixing—broken management, leasing down 30%—skills in short supply.

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