Dimon warns of “hell to pay” as private credit attracts more retail money
JPMorgan chief executive Jamie Dimon has warned that “there could be hell to pay” if more retail investors enter the private credit space without being fully aware of the risks.
According to Bloomberg reporting, during an industry conference earlier this week Dimon said that the rising number of retail investors in the private credit space has the potential to create a risk mismatch.
“Do you want to give access to retail clients on some of these less liquid products? Well the answer is — probably, but don’t act like there’s no risk with that,” Dimon said.
Read more: Institutions shift portfolios towards private credit
“Retail clients tend to circle the block and call their senators and congressmen.”
He added that JPMorgan wants to be ‘product-agnostic’ in its lending to clients. Dimon described some private credit managers as “brilliant”, but warned that problems could be caused by the “not good” ones.
In his annual letter to shareholders, Dimon wrote that the private-credit industry has not yet been tested by bad markets, which tend to expose the “weaknesses of new products.”
Read more: JPMorgan sees growth opportunity in private credit
“I’ve seen a couple of these deals that were rated by a ratings agency, and I have to confess it shocked me what they got rated,” Dimon said.
“It reminds me a little bit of mortgages.”
In April, Moody’s downgraded three direct lending funds from BlackRock, KKR and FS Investments, and Oaktree Capital Management, amid fears of rising defaults in the private credit sector.
Read more: JPMorgan looks to buy private credit firm