A: Well, certainly it's accelerated, the shift to private credit, as a result of Silicon Valley Bank and First Republic and other banks unfortunately going under or having to be rescued. There's even more of a pullback now by traditional banks, particularly in the middle market part of America, small- to medium-sized enterprises are the ones that are being hurt the most. So this used to be called "shadow banking." OK, it's now out of the shadows. It's in the full sunlight. It's now called private credit.
We look at the private credit opportunity set and we talk to our private credit managers; it's more robust than they've ever seen. Partly it's because of banks pulling back. Partly it's just the growth of our economy. Partly it's the growth of just the greater acceptance of private credit as a form of financing for small- to medium-sized enterprises. Now, it's fascinating when you look at private credit today, it's one of the few places where an arbitrage exists in our financial markets.
Right now with private credit, you get more than you should for investing in private credit. When you look at private credit, I'm talking now about senior secured floating rate loans, and you compare the credit quality of the underlying entity, the small- to medium-sized enterprise to whom they're lending, and you compare that with the high-yield bonds of similar credit rating, you're getting a higher return from the private credit senior secure floating rate loan compared to a similarly rated credit rated high-yield bond.
First, the high-yield bond is junior, it's subordinated debt. The senior secured floating rate loan is higher up in the capital structure. So it has less risk, it should yield less. The subordinated debt, being lower in the capital structure, being more risky, should yield more. It doesn't. Furthermore, high-yield debt tends to have fixed coupons. So they're subject to duration risk, the up and down movement of interest rates. A senior secured floating rate loan is a floating rate loan. It doesn't have duration risk.So again, a high-yield bond with the same credit rating, which is subordinated junior, unsecured, earns less than a senior secured floating rate loan. There's your arbitrage, it should be flipped around. Now, why is that? The reason for that is primarily market segmentation. The high-yield market for our high-yield bonds is primarily a retail mutual fund market.