SQM Research applies ‘Watch’ status to private credit sector
Research and ratings house SQM Research has placed the private credit sector on “Watch” in what it says is a response to increased instances of observable issues and announcements by the financial services regulators.
The ratings house said that the “Watch” status in this instances means that SQM will be increasing its active monitoring of the sector on existing ratings, while adjusting its ratings score sheet to place a greater emphasis on governance.
It said that as well, SQM’s initial due diligence screening, which occurs prior to a formal review, will also be increased.
“While SQM Research expects the bulk of its existing ratings to not be impacted by this watch, it cannot rule out some funds being downgraded or discontinued over the next 12 months,” the company said in a statement.
SQM Research has current ratings on approximately 70 private credit funds, covering both retail and wholesale funds, representing approximately thirty-three billion dollars of funds under management; making SQM the largest researcher of private credit funds in the Australian funds management sector.
A bit bizarre that a research house is putting private credit on watch due to announcements by regulators. Surely the regulators are making announcements because they are concerned about harm to consumers from the liquidity and default risks of private credit. Aren’t these the sorts of core issues research houses are supposed to have expertise in and be on top of?
Surely the research houses should be saying either “we have concerns about liquidity and default risk of private credit” or “we have examined these issues and do not share the regulators’ concern”. Why would advisers pay for independent expert research if the researchers are just going to follow the line of regulators?
It might be a good idea to read their actual media relase. It gives you more colour