News & Events

Corporate Partner Jason Herman is quoted in a Law360 article, “What Attys Should Know About The Rise Of Private Debt.” The article discusses the rise in popularity of private debt funds but warns of potential pitfalls going forward. Since 2006, the amount of assets under management in the private debt industry has quadrupled, according to data from Preqin, as fund managers looked to alternate asset classes following the financial crisis of 2007 and 2008. “There continues to be a trend in the alternative space towards diversification of business lines, and credit is a key component to that diversification,” Jason says. Then, in 2010, the Dodd-Frank Act was enacted, which imposed significant regulations on traditional banks that limited the amount of risk they could take. Private debt funds were then able to fill the void left by reduced lending from financial institutions. However, some are wary that private debt funds will continue to grow at such a rate. If President Trump successfully reduces regulation on traditional banks as he has pledged, banks will be able to participate again in the lending landscape, creating more competition for private debt funds. Clients still interested in private debt fundraising need to be educated by their counsel on potential risks and rewards. “A risk would be rushing into a new asset class where the sponsor does not have sufficient experience,” Jason said. “Falling down is never good.”

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