John Cole Scott, President of CEF Advisors, attended the Private Credit Summit hosted this week in New York City by Dechert LLP, and came away with a sense that private-credit markets have not yet gotten to the overheated levels that could turn investor fears of a blow-up into a financial reality. Scott, also the chairman of the Active Investment Company Alliance, discusses "stress tests" that Fitch Ratings did on some large perpetual business development companies to see how they would perform if market conditions changed dramatically, and found that the BDCs did not break under severe conditions. He also discusses how insurance companies putting money into the private credit and BDC industries is changing underwriting standards, adding a measure of safety that he says all private credit investors are likely to benefit from. Plus, he discusses his sense of where the market is in its current cycle, based on what he heard from institutional investors who were in attendance.

Ken Burdon, Partner in the registered fund practice at Simpson Thacher & Bartlett, discusses the Supreme Court's recent ruling against activist investor Saba Capital, a decision that could have a chilling effect on shareholder activism in the future. Burdon says the decision removes a key path based on the Investment Company Act of 1940 that activists took in pursuing cases over fund fees and structure. It doesn't stop the activists from pursuing cases, but makes it harder to do so, forcing them into state courts. Critics of activism have long held that professional arbitrageurs used federal courts to pressure closed-end funds into transactions that benefit activists' short term profit agenda at the expense of the long-term returns and investment objectives that the majority of investors pursued when buying into a specific closed-end fund.

John Cole Scott, President of CEF Advisors, says that index discounts are wide when compared to their three-year history, which makes it important for investors to find names where wide discounts are supported by improving fundamentals. Scott, who also is chairman of the Active Investment Company Alliance, says that both the national muni CEF index and the taxable bond CEF index have seen wider discounts that have "flipped relative values" especially given current economic conditions. Using his firm's "trifecta analysis," Scott examines four funds that he sees as the right kind of opportunities now.

Steve Baffico, Executive Vice President and head of listed products at Bluerock, which runs the Bluerock Private Real Estate fund, expects the real estate market to benefit as money moves from private credit , business-development companies and direct-lending strategies in pursuit of something with "hard assets and low obsolescence." That HALO trade should drive growth moving forward; Baffico discusses what the fund is focused on as it continues its transition from an interval fund to being a closed-end fund. That journey has included four hikes in distributions over the last four months, and Baffico says he explains what the firm is doing to quickly reach its target distribution rate of 8 to 8.5 percent.

Gordon Hamilton, Senior Managing Director for Kayne Anderson, Portfolio Manager for the Kayne Anderson Energy Infrastructure fund, says that there will be a big call on U.S. energy infrastructure companies to meet global demand for propane, butane, crude oil and natural gas as the world gets through the current energy crisis created by war in Iran. Coupled with an energy "supercycle" driven by artificial-intelligence needs, it is creating a positive long-term demand picture where infrastructure should be able to have persistent performance even if current events or A.I. expectations add concerns to the market.

Bryce Doty, Senior Portfolio Manager at Sit Investment Associates, says that "the worst is over as far as yields going up," noting that the next shift could be down, but he calls the conditions "tricky" and emphasizes that investors "need to be in the right part of the curve." Doty's case hinges on oil prices; if oil stays below $110, it's viewed as inflationary, but above that level "we have a problem, and so does the rest of the world." At that point, central banks will have to cut rates to "save economies from disaster." Doty, whose team manages $2.7 billion in closed-end fund-of-funds for separate accounts, likes two-year TIPS, municipal bonds and high-yield corporate bonds. He also discusses the IPO market, closed-end rights offerings and the quality of private credit investments.

John Cole Scott, President of CEF Advisors and the Chairman of the Active Investment Company Alliance, looks at the recent issues in business-development companies, which got hammered in March as the market punished software investments, including lenders who made loans to software firms. While BDCs rebounded in April, they remain significantly down, and Scott discusses how the companies with the biggest troubles have higher yields and bigger discounts, but the top performers are delivering a better return on equity and are the better, safer bet while the industry gets through the current rough patch.

Matt Freund, Co-Chief Investment Officer at Calamos Investments, says that productivity, GDP growth and earnings are "what matters," and that the headline risks that are driving consumer sentiment are "distractions" from a market backdrop that is solid. He says inflation remains the big risk, but notes that the investor sentiment is creating opportunities, particularly in closed-end funds, and especially in senior loans and high-yield bonds, where discounts have widened this year.

Dr. Mark Mobius, widely considered the father of emerging markets investor and a man who helped put the world into everyone's grasp during his long career running funds at Templeton, passed away in mid-April. John Cole Scott, President of CEF Advisors, recounts Mobius' legacy and lasting lessons by digging into interviews conducted by his father, George Cole Scott, Founder of the Closed-End Fund Letter, with Mobius over the decades. Scott, the chairman of the Active Investment Company Alliance, makes sure to include why Mobius felt that the closed-end fund structure was particularly useful for emerging markets investors following his value-oriented strategy.

David Gutierrez, Vice President at Liberty Street Advisors and part of the team running the Private Shares Fund, says that private markets are similar enough to public markets that artificial intelligence is now one of the big sweet spots in both. However, he says the best opportunities involve infrastructure more than AI itself. Gutierrez notes that the Private Shares Fund—an actively managed, continuously offered closed-end interval fund investing in late-stage venture capital and private company opportunities—is focusing heavily on AI infrastructure right now. For instance, he explains how the shift from copper-based to optical-based networking in servers has become an investable trend, and how this trend depends not on AI performance but rather on the demand for more AI technology support. Gutierrez also discusses shifting trends in how long private companies are waiting before going public, and how geopolitics could be impacting private firms.