Fool’s Yield and The Wild West of Private Credit

Published on
January 22nd, 2020
33 minutes

The Best Laid Plans: Understanding Elizabeth Warren’s Economics

Fool’s Yield and The Wild West of Private Credit

The Expert View ·
Featuring Dan Rasmussen

Published on: January 22nd, 2020 • Duration: 33 minutes

Do higher yields actually lead to higher realized returns in private markets? Dan Rasmussen is the founder of Verdad Advisors — a firm that applies a private equity investing framework to public markets in an effort to replicate private market returns and reduce risk. He joins Real Vision to shed light on the phenomena of "fool's yield." Rasmussen argues that investors have been seduced by the promise of boosted returns and ignored the myriad of risks in the opaque investment space rife with deteriorating credit quality, obfuscated default rates, and a major lack of regulation. Filmed on January 16, 2020 in New York.



  • WS
    William S.
    26 February 2020 @ 17:44
    Not on point but the product shift demands a response How many purchased a product prior to today and are feeling unfairly treated by the 5/wk video limit that didn't exist until today? How many feel they should be grandfathered until their subscription runs out and then make the decision to continue at the lower (actually increased by 50+) or accept the "upsell" at 3x the price??
  • RS
    Ramsey S. | Contributor
    8 February 2020 @ 16:50
    Great and insightful interview
  • AL
    Andrew L.
    5 February 2020 @ 03:14
    I agree with many of your points, great information. One part of the private credit space I feel does make sense is private credit against hard assets (real estate, infrastructure). This is assuming appropriate covenants and quality operators behind the assets. Banks stepped away from many area of the markets. Skilled investors that are prudent can take advantage of these opportunities.
  • NC
    Norman C.
    4 February 2020 @ 18:21
    Great interview!
  • M.
    Milton .. | Founder
    3 February 2020 @ 15:48
    "One of the best interviews I have seen on RV. Well done!" sums up this video very well. That's why I have a short update that's worth booking in your calendar. This Thursday (6th of Feb) at 11am EST (4pm GMT) we'll have Dan back for a follow up live talk to ask him all the pressing questions you and we have. Please send in your questions to
  • NA
    N A.
    30 January 2020 @ 05:05
    Great interview. The amount of credit funds I see is unsavoury. They all point to the low default rates but none have been through a crisis or recession, in any case the data is usually 10 years back. As much as I would like to see it happen, I don't think there will be a big day of reckoning for many of these funds and their investors. As mentioned in the interview, they will just receive less than expected over the 5-10 year life of the fund. So for a CIO of a pension or endowment the question is simple, do I want to make 2-4% in what everybody else is doing and have a long shot at making more than that if no recession hits by the time I leave or make a guaranteed 2-4% with the fixed income alternative? The answer is obvious. And this is also self fulfilling because as billions pour into this asset class the show can go on longer, much much longer, than one would expect. These are the biggest allocators in the world, their interests are aligned with the PE guys, nobody has any interest in seeing this thing blow up. In the mean time you get a nice monthly "NAV" statement that says you made another 60-80bps last month and everybody is happy. Vol is zero. It's kind of a sick joke.
  • CG
    Christian G.
    29 January 2020 @ 20:42
    This guy's brain is wicked sharp. Kudos!
  • KA
    Kevin A.
    27 January 2020 @ 22:04
    Good video. This is literally the first video of 2020 that I have watched. What happened to the notification emails?
    • M.
      Milton .. | Founder
      29 January 2020 @ 07:15
      We are testing to see how well a one email a week approach works. It goes out to everyone on Friday when most of the content is digested. We shall see how this works.
  • MH
    Martin H.
    29 January 2020 @ 05:58
    If markets where efficient there would be very little opportunity. Markets are more efficient than the alternatives but they are by no means highly efficient.
  • MC
    Mike C.
    28 January 2020 @ 20:07
    Pretty shoddy brickwork there, right behind Dan's head. Wild West Bond?
  • DB
    Daniel B.
    28 January 2020 @ 11:19
  • DG
    Daniel G.
    27 January 2020 @ 18:22
    Access to credit drives everything. More interviews like this please!!
  • CH
    Charles H.
    27 January 2020 @ 04:58
    Great interview, thanks.
  • DT
    David T.
    26 January 2020 @ 23:52
    This was an outstanding interview. I must confess. I was predisposed to appreciate and agree with Dan's insights and rational/empirical based thinking about an investment philosophy. There is a bit of contrarians in some of us who still believe in buying low who are completely befuddled by the mainstream narrative of professional money managers that under the leadership of our President and the central bankers, there will never ever be another recession nor any volatility. Ever since the GFC, many of us find it incredible that historical valuation metric have been completely disregarded. What is the value of a bond under NIRP? (other than a short term speculation that rates are going lower) AI and algorithm know how to predict future returns because they can influence human behavior through surveillance of our interactions with the digital wonderland. Just today I read in Barron's that one of the Roundtable's best minds think TSLA can be worth $4,000 to $5,000 and is one of his top six picks for 2020. Dan, thank you elucidating your thoughts. Raoul and Jim, thank you for having Dan on Real Vision. To fellow viewers, i suggest you view the 2018 Jim Grant Interview with Dan and also the interview with Andrew Dym? (I may have gotten his name wrong) where I believe he simply explained that it is OK to invest in high yielding private credit because "they" will be bailed out should they default. Hey, who knows, he may be right. It is a crazy world out there. What if the central bankers start buying equity market derivatives to keep the value high? Is Apple the future of our technology prowess or simply a consumer product and service company? I do get a lot of value from Real Vision.
  • JD
    John D.
    26 January 2020 @ 06:48
    Exceptional !!!
  • JD
    John D.
    26 January 2020 @ 06:48
    Exceptional !!!
  • JD
    John D.
    26 January 2020 @ 06:48
    Exceptional !!!
  • GG
    Gary G.
    26 January 2020 @ 01:17
    Great interview!
  • JR
    Jon R.
    23 January 2020 @ 20:37
    Very interesting interview. Would be interested to have heard a little more about Dan's background and strategy for his own fund and what he does feel represents value.
    • FF
      Frederic F.
      25 January 2020 @ 23:14
      I believe there is an earlier interview where he explains his background.
  • MN
    Michael N.
    25 January 2020 @ 19:40
    excellent. Dan is a credit beast! thanks
  • PH
    Paul H.
    25 January 2020 @ 19:34
    Very candid succinct observations on today’s dangerously irrational Ponzi markets. Thank you for this Dan. Paul H.
  • WM
    William M.
    25 January 2020 @ 18:58
    Dan does a great job providing more evidence of the everything bubble excesses that central bankers have created over the past decade. And when the music stops, the pension funds etc. will be even more underfunded. The everything bubble could burst anytime - nobody really knows exactly when it will be or what exactly will trigger it - but historically the best time to hold cash is when it feels most miserable and pointless like now. As the desperation for yield grows, it's better to go for assets like cash and precious metals that have little or no yield but best preserve own's wealth as the next big implosion occurs.
  • bm
    bill m.
    25 January 2020 @ 03:08
  • KS
    Kamil S.
    24 January 2020 @ 09:17
    Phenomenal interview Dan. You explained everything happening in the private space together in a way a simple rates guy like me can understand.
  • JO
    Joseph O.
    24 January 2020 @ 04:06
    Great communicator but missed a few things, particularly at the end (I think for simplicity rather than ignorance): 1. Pensions and some other institutions have defined benefit contribution plans that mandate they seek certain returns 2. Where was the Fed in all of this talk of rates and risk and what is essentially a market mispricing / dislocation argument?? Felt like "Voldemort"!
  • JH
    Jesse H.
    23 January 2020 @ 21:22
    Superb. I fully understood this and I’m really just a layman / amateur investor. Please have Dan back again soon.
  • GH
    Garrett H.
    23 January 2020 @ 20:28
    Sounds like a very complex multi-institutional Ponzi scheme.
  • KM
    Kyler M.
    23 January 2020 @ 19:54
    Great video but how do we profit from this. is there a publicly traded private equity high-yeild bond firm to short?
  • JE
    J E.
    23 January 2020 @ 19:50
    awesome, love the lending tree chart, thank you
  • BC
    Brent C.
    23 January 2020 @ 14:28
    I can't help but feel Dan's point about most PC loans being single B or below is playing out visually in the traded CCC credit space currently. While all other spreads have rallied since repo bailout began, CCC seemed to miss the majority of that memo....
  • AP
    Adam P.
    23 January 2020 @ 14:01
    Excellent interview. Great job.
  • WG
    Wade G.
    23 January 2020 @ 13:52
    Simply outstanding. Mr. Rasmussen has a gift for making the complex easily understood.
  • DT
    David T.
    23 January 2020 @ 13:29
    Congratulations to Dan and RV. I've followed Dan since Jim Grant brought him on RV (another case of the subscription that easily has the best return of any investment ever), great to get him back on for an update. Surname aside, a very brave articulation that the Emperor(s) are indeed naked. What's missing: what's the catalyst that will change the comfortable status quo, 'liquidity events' aside? As Dan said, the entire ecosystem is aligned to let the music keep playing in a non-mark-to-market infinite petri dish via nominally funded bailouts and USD debasement from a Fed chaired by an ex-Carlyle partner. Different but same, a closely rhymed version of 08-09, yet noone was held responsible then except the sacrificial offerings of a few junior traders with egregious sins. Boomers the inevitable unknowing bag holders again via pensions, most won't be alive long enough to realize they've already been bled dry by a thousand cuts. So said Prince, no more bust. The allocator that sticks to 3% yielding investment-grade won't keep his or her seat long enough to time an eventual crash to deploy into what's left.
  • PJ
    Peter J.
    23 January 2020 @ 10:23
    Great presentation
  • TM
    Timothy M.
    23 January 2020 @ 00:38
    One of the best interviews I have seen on RV. Well done!
    • NP
      Nick P.
      23 January 2020 @ 09:08
      Agree, back to the old RV. More like this, please.
  • MS
    Michael S.
    23 January 2020 @ 04:06
    Another phase of the ZIRP-era raid on the pension funds. First was the low yields pension funds have been forced to invest in over the last decade. Now he's describing the snake oil those low yields are forcing the dense pension fund managers to buy in order to avoid the low yields.
  • NI
    Nate I.
    23 January 2020 @ 03:51
    I 100% agree with everything Dan said. Some of my retirement money is sitting in a State government pension fund. I wish there was some reasonable recourse for people like me to hold these pension fund managers accountable - not only for everything Dan spoke about, but also for promising higher returns than are even remotely possible.
  • NH
    Nigel H.
    23 January 2020 @ 02:47
    Top drawer
  • MR
    Maxim R.
    23 January 2020 @ 01:35
    Loved it! Amazing interview guys, tons of good staff
  • AB
    Andy B.
    22 January 2020 @ 21:48
    I really admire Dan for speaking the truth. Two years ago I made the same comments at an investment meeting at one of the largest UK asset management firms. Needless to say I was never invited again. At the end of the day the financial sector is a self-serving machine. Everyone will make money out of it with the exception of the investors in those pension funds. Thanks for your honesty.
    • DS
      David S.
      23 January 2020 @ 00:38
      I agree with you Andy. B. It is similar to the mortgage back security fraud. Everyone made money and hid behind the stupid rating agencies triple A rating. They knew it was a scam, and the tax payer had to bail them out. They will be looking to the tax payers to bail them out again as Aunt Mary's pension will be in trouble. DLS
  • MR
    Michael R.
    22 January 2020 @ 19:54
    Great interview, but why can't we just get the actual interviewer rather than these weird robot voice overs?
    • AH
      A H.
      22 January 2020 @ 23:25
      there isn't an interviewer - they're given questions and answer them on film (or so it seems). In the past people who download the audio would complain that the questions weren't narrated.
  • AE
    Anders E.
    22 January 2020 @ 23:17
    I can't help but think the thumbs down are from private equity people voting their book. I thought it was good and most likely very true. Though I don't think times are as good as headlines would have you think. Total corporate profits are down 10% since 2014 and global indicators have crashed over the last year and a half. But I agree the consensus still is times are good...
  • RC
    Ronald C.
    22 January 2020 @ 21:30
    Grade A video. Dan always backs up his conversation with research/data. I wished I could say that about many of your guests.
  • DS
    David S.
    22 January 2020 @ 19:45
    If a pension manager accepts a 3% safe yield, which is prudent, the institution providing the pension fund must add more capital each year to keep the pension funded. The safe pension management firm will have a hard time finding clients. With the siren's song of we are invested in higher interest and undefined market risk, the institution can "act" like it does not need to top off the pension fund each year. The only thing that will save them is inflated real assets with MMT. This may be what the real bet is. This will not save a WeWorks type investment. When risk is not measured reasonably poor decisions are made. Market to market is not perfect, but corrects more quickly. Over time non-market-to-market is a fool's paradise. DLS
  • JL
    Jack L.
    22 January 2020 @ 09:31
    Raoul's right. The most engaging content in the entire media world. I'm more drawn into, illuminated, and excited by this timely, topical monologue than any movie or streaming fiction series I've watched in the past 12 months. Outstanding.
    • RP
      Raoul P. | Founder
      22 January 2020 @ 19:31
      WOW! Thanks!
  • SC
    Sam C.
    22 January 2020 @ 12:49
    Sadly I can't find this lending club graph on the lending club website. But these Yields seemed really high.
    • SC
      Sam C.
      22 January 2020 @ 12:52
      But I did find this beauty, "68.16% of LendingClub borrowers report using their loans to refinance existing loans or pay off their credit cards as of 09/30/19." ✌✌🤦‍♂️
    • SC
      Sam C.
      22 January 2020 @ 13:04
      Found it you can download the data for yourselfs;
    • DS
      David S.
      22 January 2020 @ 19:16
      Paying off credit cards is a good thing. It would be interesting to know how many are back paying off the same credit cards as they do not change spending habits. DLS
  • JB
    JENNA B.
    22 January 2020 @ 18:35
    Phenomenal. Exactly what’s needed at this point.
  • PG
    Philippe G.
    22 January 2020 @ 18:25
  • TS
    Theodoros S.
    22 January 2020 @ 18:08
    Beware private equity, be-loved public equity.😜
  • HK
    Himali K.
    22 January 2020 @ 17:20
    This was such a timely video, RV Thank you!!
  • PP
    Paul P.
    22 January 2020 @ 16:07
    Dan Rasmussen. Great job. I like how you talk in your vernacular. Great video. Must watch.
  • VR
    Vladimir R.
    22 January 2020 @ 09:12
    That was a great interview, but one big thing is missing. What about the central banks and the growing trends of fiscal stimulus towards "winners" like ESG. Waiting for fair risk price is a bet against the Fed in the end.
    • RM
      Robert M.
      22 January 2020 @ 15:05
      The money that is locked up will simply be debased, effectively magnifying the pain.
  • OG
    Oliver G.
    22 January 2020 @ 10:21
    That was excellent! So much valuable information
  • SC
    Sam C.
    22 January 2020 @ 10:04
    Dan is such a good sport. I love this guy.
  • PP
    Peter P.
    22 January 2020 @ 08:27
    That was an outstanding video, thank you very much!
  • SP
    Steve P.
    22 January 2020 @ 06:44
    So many credit risk analysis insights!