(Bloomberg) -- Private credit assets should be trading at a premium to traditional fixed-income assets given their lower liquidity, according to Franklin Templeton Investments Chief Executive Officer Jenny Johnson.
Johnson said she’s concerned that some investment- and non-investment grade private credit assets are trading at the same spreads as traditional fixed-income investments like corporate bonds.
“You get no premium for illiquidity — that worries me,” she said at Bloomberg’s Women, Money & Power conference in London on Tuesday. Franklin oversees a total of $1.6 trillion in assets.
Private credit has more than doubled in size from 2019 to become about a $1.7 trillion industry following increases in interest rates. While investors have been grappling with an illiquid market, regulators around the world have intensified scrutiny over concerns about such products potentially causing financial instability.
Speaking on blockchain technology, Johnson said the trend is going to “create a lot of efficiencies” in financial services and open up new investment opportunities.
“Eventually your financial advisers are going to report your portfolio in three ways,” Johnson said. “Here’s your investment return, here’s the impact you have and by the way, here are the loyalty programs that you have gotten from your tokenized equity ownership that have now tied loyalty programs to it.”
Asked about the investigation of Ken Leech, the former star trader of Western Asset Management Co., Johnson said “it’s a difficult situation” and that her company is cooperating with authorities.
Franklin assumed control of Wamco and agreed to allow it to operate with a great deal of independence for five years as part of its purchase of Legg Mason in 2020. Johnson has said that arrangement is now under review.
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