(Bloomberg) -- Värde Partners plans to lean into private credit opportunities this year after the late 2023 rally in liquid markets.
"This shift leads us to apply a private credit approach to create transactions in the traded credit markets, such as new money solutions, club new issuance and private securitizations," according to an outlook report from co-Chief Investment Officers Ilfryn Carstairs, Brad Bauer and Giuseppe Naglieri. Värde has about $13 billion in assets under management.
Investors tightening their credit pocketbooks is creating opportunities for lenders, they wrote. Firms like Värde can step into the gap, buying assets from banks and investing in fixed income, while other capital sources have dried up or become cost prohibitive.
Värde anticipates the broader bank de-risking and regulatory capital stress theme remaining front-and-center for the bulk of 2024. The firm sees opportunity in bridge lending secured by well-located commercial real estate collateral in healthier sectors and in purchasing performing loans or portfolios from banks and other participants looking to de-risk.
Despite that, commercial real estate may be one of the more challenging sectors to navigate as significant hurdles including macro and market-specific stresses pile up, according to Värde. They said the $5 trillion market in the US is on track for a massive default cycle that won't pass quickly.
"We have a number of high-conviction themes in CRE — albeit all viewed with some degree of caution given the overarching reality that capital in the sector will, justifiably, be selective in the coming years," according to the report.
Elsewhere, Värde continues to see major investment possibilities in risk-transfer transactions, secured debt directly backed by real estate and dislocated first-lien bonds.
"We expect to seek out these opportunities in more recession-sensitive sectors, where stress is already picking up and the toll of higher interest costs may force companies to reckon with leverage issues sooner rather than later," the partners wrote. "There are a number of companies with good businesses but burdened by too much debt that will need to de-lever."
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