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HIDDEN VALUES
Lack of valuations pose risk for secondaries
USE YOUR ASSETS
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Asset-backed finance is booming
Alternative Credit Awards: Winners and photos >> 8
Trump’s tariffs threat could hit private credit borrowers
ISSUE 100 | DECEMBER 2024
DONALD Trump is set to become the president of the United States once again and although the removal of uncertainty has been welcomed by many alternative asset managers, some are cautious about what potential policies will mean for private credit investors. “If protectionist policies are enacted, international investors will need to consider the potential impact on global corporates as it relates to non-dollar assets, stability of supply chains and risk-adjusted capital allocations to ensure there is adequate coverage for tariffs (if rolled out) and the degree to which trade policy, currency implications and increased legislation could impact operating margins,” commented Maggie Arvedlund, chief executive of Turning Rock Partners. “All asset-backed players will undoubtedly be re-underwriting
their portfolios to assess winners and losers under new international trade regimes,” she added. While a Trump administration is expected to be more light touch on regulation, the president-elect could pursue protectionist policies and implement increased tariffs. Analysts at S&P Global Ratings said in a recent note that they believe “a universal tariff and sharply higher tariffs on Chinese imports
could mean an increase in US inflation, and a drag on GDP growth”. This in turn will affect many industries, such as tech, due to higher input costs and margin pressures. Companies like port operators or transportation leasing companies can also be hurt, as well as utilities and power companies, retail and restaurants, consumer products, healthcare and building materials, the analysts at S&P said. Michelle Russell-Dowe,
co-head of private debt and credit alternatives at Schroders Capital agrees that tariffs will likely increase the potential for supply-side inflation, which is not something that Fed policy can easily influence. “Inflation alongside a ‘normalising cycle’ is an odd concept, this will likely result in a higher terminal Fed Funds Rate than what was previously anticipated,” she said. “This likely means income realised along the >> 4