Recorded live at the Exchange ETF Conference, host Ryan Nauman welcomes Christopher Getter, Managing Director and Portfolio Manager at Simplify Asset Management, to discuss why private credit has become a hot—and increasingly scrutinized—topic in wealth and asset management. Getter explains recent idiosyncratic blowups, AI-related disruption risks in tech-heavy private credit, and broader late-stage credit-cycle behavior as spreads tighten and managers reach for yield. He argues concerns are warranted but not comparable to 2008, noting private credit has already repriced with discounts to book value widening north of 20% while high yield spreads remain relatively tight. The conversation highlights liquidity and structure mismatches for retail investors, manager dispersion, and why private credit can offer floating-rate exposure and higher returns—alongside hidden volatility and drawdown risk. Getter also discusses liquid alternatives such as managed futures, currency strategies, and hedged high yield, emphasizing that advisors should look beyond labels, understand true exposures, and ensure investors are compensated for the risks taken.

Learn how Zephyr can help financial advisors create modern diversified portfolios here.

Learn more about Simplify Asset Management here.

00:00 Welcome and Disclosures

00:38 Live From ETF Exchange

01:35 Meet Christopher Getter

01:57 Simplify and Alt ETFs

03:05 Why Private Credit Scrutiny

05:09 Spreads and Pain Priced In

08:05 Systemic Risk or Not

08:50 Not Another 2008

09:48 Late Cycle Credit Behavior

10:30 Retail Fit and Liquidity

12:48 Private vs Public Credit

14:56 Liquid Alternative Options

17:25 High Yield With Hedge

18:19 Advisor Due Diligence

19:33 Wrap Up and Where to Learn More

Connect with Ryan Nauman:

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Welcome to the Adjusted for Risk Podcast.

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Join myself, Brian Nauman as I

talk market investment economic.

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Let's get started in life as

I help prepare you for the

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not reflect the opinion of Zephyr

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This podcast is for information

and purposes only and should not be

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relied on for investment decisions.

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Welcome everyone to zephyr's

Adjusted for Risk podcast.

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We are recording on location

at the Exchange ETF conference.

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It's been a great couple of days.

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I've had some fantastic

conversations and the next one.

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I'm sure is gonna be a great conversation

to one that I'm really looking

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forward to on a very timely topic.

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You know, it's one of the hottest topics

in the wealth and asset management

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space has been private credit.

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The asset space has grown tremendously

since the great financial crisis

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and now it's under heavy scrutiny.

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Well, I have on the.

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Perfect guests to tell us if the

concerns are warranted or not.

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But first, this episode is sponsored

by the award-winning Zephyr, which

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helps investment professionals

make more informed investment

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decisions on behalf of their clients.

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All right.

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Enough for me.

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I've already talked enough.

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Let's bring on the star of the show.

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I'd like to welcome Chris Getter.

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Chris is the managing director

and portfolio manager at

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Simplify Asset Management.

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Chris, thank you so much for coming on.

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It's an honor to have you.

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I'm really excited

about this conversation.

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Can you please tell us a little

bit more about yourself and

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simplify asset management?

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Sure.

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Thanks for having me on, Ryan.

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I'm excited to be here too.

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Um, so I joined Simplify about two

years ago and most of our focus.

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Is on bringing alternatives

into the ETF structure.

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So we are taking full advantage of some

of the regulatory changes that occurred

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just over five years ago, uh, specifically

with respect to deployment of leverage

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utilization of derivatives in ETFs to

make what would normally be strategies

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that are restricted to institutional

investors available to a broader

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audience in the liquid ETF structure.

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Uh, that's fantastic.

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Chris, I'm a big believer in

democratization of investments.

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Like why should these institutional level

strategies be only for institutions?

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Right, and especially alternatives.

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They can.

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It brings such good benefits

to a portfolio through

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diversification, you know, maybe

enhanced risk adjusted returns.

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So I'm glad that, especially

in the ETF wrapper where um,

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they're easier to access access.

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You also have that transparency and

everything that goes along with that ETF.

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And like I said, private credit,

it's come under huge scrutiny

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recently for, for obvious reasons.

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But Chris, how have we.

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Got to this point where people are

now concerned that this crisis, if

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you want to call it crisis, I don't

think it's a crisis yet, but could

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snowball into, you know, a major

crisis for the financial markets.

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So I, I, I'm not in the crisis

camp and I think what we have

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seen in private credit is.

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Maybe, maybe it's the tell, but a

lot of it is really more endemic

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to what's gone on in private credit

and how the asset class has evolved.

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So going back to the summer,

early fall of last year, you

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had some idiosyncratic events.

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Uh, first brands tricolor More

recently you've had MFS naturally

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leads people to wonder, you know,

are there, are there many, many

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more of these idiosyncratic events?

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That's number one.

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Yeah.

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Number two is the disruptive potential

of AI as it pertains to the tech

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sector where a lot of private sector

credit has been deployed much more

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so than in the high yield market.

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Technology in the high yield market

is, is somewhere between five and 10%.

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It tends to be skewed more

towards, uh, consumer sectors.

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And the third, more recently is the

impact of what's going on in Iran and

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how that might dent the uh, US economy.

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All of that has a gain weight,

um, against private credit.

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But more broadly, if we look at what's

gone on in the high yield market,

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we've been saying that high yield is

probably too tight for, you know, going

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on a year now, um, not only do some

of the, the economic variables that

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we look at suggest to us that high

yield had been stretched, but also the

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realized bank level of bankruptcies

among corporates has now risen.

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To about 50% above the

trailing 12 month average.

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So there's clearly some signs of stress

in the market against that, Ryan, and

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I'd weigh the fact that we've had a

significant repricing already, um, and

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probably more advanced in private credit

than it is in the high yield market.

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So high yield market spreads, bottomed.

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In January, there are about

70, 75 basis points wider.

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So far in private credit, you've had

discounts, widen discounts to book

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value, um, widen to north of 20%.

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So there's a lot of pain

priced into the market already.

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That's interesting that there is a

lot of pain because like you said,

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when I look at credit spreads, they're

pretty, they've gone up a little bit

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recently, but they're still very tight.

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It's like.

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I feel as if they should be wider

for the uncertainty that's out there.

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Right.

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But you're seeing that more, you know, pri

the private space is kind of indicating

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maybe there is some distress out there.

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I think so.

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Um, so our estimates, I.

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Okay, going back to wind spreads, were

at the tights, and you're right, they,

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they were upwards of the 90th percentile,

actually upwards of the 95th percentile

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of tightness relative to their history.

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Um, our assessment at the time

was that they were probably

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200 ish basis points too tight.

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This is in the US high yield market.

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You've had a roughly 80 basis point

widening so far, so they're still tight.

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Mm-hmm.

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So I, I definitely agree

with, with that sentiment.

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So do you think, and I think.

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You kind of already answered this

question, but do you think the

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concerns in private credit, that

issue, they're a little overdone,

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maybe we're a little too concerned and

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o overdone.

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I, I don't know if I'd say they're

overdone, they're warranted.

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This is a new asset class that people

have not the sort of familiarity with.

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I think people are coming to the

realization in some cases, um, that

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their capital is locked up, right?

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Like.

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It, it, it's not that this is a surprise

to people, it's a surprise that, you know,

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it's a surprise to them that they were

gonna want their money back that quickly.

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So I don't think it's a, it's nothing

endemic to the asset class, aside

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from, you know, people, people starting

to have a better appreciation for

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the way that these structures work.

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And the second thing is, there's

being a huge amount of dispersion.

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Like if you pick, you know, let's

just say you pick A, B, D, C to

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express your private credit view.

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Business development company that

lends to the, to the private sector.

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Um, you could have a very

good experience last year.

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You could have bought

somebody that was up 25%.

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You could have bought

somebody who was down 25%.

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So I think we need to separate

the asset allocation decision from

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the manager selection decision.

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And, and clearly if you pick

the manager who's down 25, who's

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gated you in, who's written down

assets and being in the paper.

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Probably ain't so happy.

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Yeah, I think that's perfect, Chris,

because my next thought was, you

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know, is this more of a systematic

issue where just, and you brought it

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up earlier, you know, tech, you know,

ai, it's gonna disrupt the tech space.

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And we've seen the software companies

that was recent, um, you know, that caused

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some distress within private credit.

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Part of me thinks, you

know, it's not systematic.

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It's more concentrated and then also, like

you said, there's a misalignment between

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the offering and who's investing in it.

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I think that's starting to show too.

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Do you think it's just more

concentrated to certain areas of private

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credit and not really systematic?

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Yeah, I don't think it's systematic.

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In fact, the, the one.

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I will answer an additional

question, which you, you haven't

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asked is, is how much is this?

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Like 2008?

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And that's where I really get frustrated

because the, you know, if you look

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at what the, the, if you wanna call

it, the threat from AI to some of

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these companies is, it's not that

they won't be going concerns anymore.

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They may be less profitable.

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We've already seen layoffs and,

and those have been happening for

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a year, oh, well over a year now.

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Um, it's that they might have not

have the sort of rentier level margins

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that they enjoyed in the past, but

it's probably not that they're going

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to cease to exist as a going concern.

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Contrast that with 2008, where you

had structures that were built on

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faulty assumptions, and when the

bottom started caving, it brought

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down the rest of the house of cards.

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I don't see a lot of similarity.

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To what's gone on in the

private credit market.

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But you know, again, that's not to

dismiss the fact that we are probably

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in the late stages of a credit cycle.

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Yeah, yeah.

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What does that, I'm glad

you brought that up.

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The, why does that impact it then?

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That late stage of the credit?

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Can you go into a little

bit more detail there?

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Yeah.

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I mean, in the same way that

many of us are behaviorally

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tempted to reach for returns.

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Credit managers do the same thing, right?

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I mean, spreads get tighter and tighter.

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I money's coming in, yeah, I

gotta put it to work somewhere.

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And so you start stretching for that

extra little bit of yield and that yield

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comes at progressively less compensation

for the risk that you're underwriting.

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That's late stage credit cycle behavior.

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Interesting.

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I love that.

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Thank you.

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Great, great insight there.

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So then I brought it up a little, you

know, that misalignment, you know, for

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the past year, even before that, it's like

private credit that, or just alternative.

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Private managers are really trying

so hard to get into the retail space.

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Private wealth, same time, private wealth.

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They really want to get in and bring

it, get exposure to private markets.

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Both want each other.

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Right?

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But do you think.

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Maybe we should have taken a step back

and like really thought about this because

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now all of a sudden those retail investors

at private wealth, like you said, they

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weren't in the investment very long

and now all of a sudden they want money

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out where they just misalignment there.

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They didn't really understand the

investment that they're getting into, and

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that's kind of the, the bigger issue here.

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It is possible.

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Um, you know, I, I certainly didn't

come on here to point fingers Ryan,

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but I, I do think that, uh, do it,

there, there is a little bit of shiny

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new toy and, you know, you, you either

somewhere between shiny new toy and

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fomo, oh, you know, my buddy, his

advisor or put him into private credit.

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Um, and there may be some, you know.

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There may be some excitement

around it that isn't matched by

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the due diligence that's gone into

considering whether it's a fit.

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I mean, uh, there are plenty of

institutions who can underwrite the

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illiquidity, the hidden volatility,

the ability to put capital to

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work on a called basis, right?

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You're committing to if, if

you're an institutional investor,

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you commit to put capital.

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To work when the private

credit sponsor asks for it.

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That's not really easy for

an individual investor to do.

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And I think some of what we've seen,

the enthusiasm to get into it perhaps

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wasn't paired with enough due diligence.

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Yes, it's a great product.

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I often say it's a great product

for the right portfolio, but at

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the same time, it can be a terrible

product for the wrong portfolio.

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Mm-hmm.

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And if you don't understand that, and

the financial advisor job is really hard.

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All the new products out there and

the demands on them, you know, but,

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you know, continue to educate, make

sure that those product aligns with

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what, uh, what the investor needs.

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Why, let's compare it to public credit.

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Why is private credit a good

alternative for public credit?

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And let's assume it's

for the right investor.

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Mm-hmm.

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Why is it a good alternative to your

traditional ag or public credit?

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So there's, there's a couple

of things it offers you.

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Yeah.

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Um, one of which is the private nature of

it doesn't have as much public scrutiny.

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That's number one.

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Number two, floating rate issuance.

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So if, if you say, I, I really

like credit, but I'm a little bit

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concerned about interest rates

going up, private credit might

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be a good fit for your portfolio.

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You can immunize some of

that interest rate risk.

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Um, the, the what those net out to

over time has historically been.

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A higher return than investment

grade or high yield credit,

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we say, okay, that's great.

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Mm-hmm.

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Um, and the other thing that, that,

which I do believe, uh, investors

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have been sold a bill of goods on, is

the lack of volatility where the high

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yield market has undergone stress.

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Private credit has really

taken it on the chin.

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We don't have decades worth of history

here the way we do in some others.

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But if you go back to 2020.

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Um, I think the high yield market was off

mid-teens, private credit was off 38%.

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Okay.

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So you have this, what people perceive

to be a lack of volatility until

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you have a massive rapid drawdown.

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That's the trade off of getting

these higher returns and, and,

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and the less interest rate risk.

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So it's, it's every bit is vol

and actually measured volatility

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in private credit, much higher.

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Than any other form of public credit.

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But that's the draw is more return.

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Yeah.

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Well, there's no free lunches, Chris.

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I, I think I learned

that early in my career.

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No free lunches unless you can't just

have higher return without a drawback.

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Right.

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And Chris, if you tell me I can

get 10% return with no risk,

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I would be a little concerned.

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It'd be a little, I might, uh,

be like, uh, Chris, what are

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you trying to cellmate here?

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Yeah.

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Um.

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So with that being said, are there

some other strategies out there?

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Yes.

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Private credit, you brought

out the benefits and, and what

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it can bring to a portfolio.

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Are there other strategies that might

provide some similar benefits that

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private credit without that risk,

maybe without that volatility such as

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liquidity risk that maybe investors

can, um, invest in that like said

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doesn't have the liquidity risk.

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So in terms of the, within the

alternatives bucket, and I'm, I'm a

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big fan of, of ensuring that I use the

plural alternatives, not alternative.

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Because as, as an, as advisors go

from traditional 60 40 to, you know,

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55, 35, 10, you know, 50, 30, 20, um,

you, you, you, you gotta have, it's

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inexcusable to not have multiple assets

within that alternatives component and.

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While, while I do think private credit

fits in there, I think there are plenty

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of other liquidy accessible, perhaps even

more pedestrian things that go in there.

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Like a managed future strategy.

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That's a good fit.

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Right?

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It doesn't, I mean, just even setting

aside what we are doing at simplify,

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managed futures generally exhibit low

correlation with stocks and bonds.

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They're zigging when you're.

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You know, 60 40 zagging,

um, currency strategies.

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We've recently been pushed into

the currency space with a strategy

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that is, is done phenomenally

well, all systematically managed.

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Um, not only has it produced fantastic

absolute returns, it's diversified,

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the very low correlations, almost

actually negative correlations between

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stocks and with stocks and bonds.

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And critically it is.

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Uh, lowly correlated

with other alternatives.

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So that's kind of what

you want in a portfolio.

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Like things, things that have a

positive return but don't behave

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like other stuff in the portfolio.

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That's a very valuable property.

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So I think those are in,

again, both of those things.

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Very liquid.

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Um, easy to access.

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Yeah, I love those examples.

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I think they're great.

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Um, alternative, I wouldn't even say

alternatives to private credit, but

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just something else to consider for that

alternative sleeve that you talked about

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that provides liquidity, which you know,

is very important to a lot of people.

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Yeah.

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One more, I might, I'm

sorry to interrupt you.

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No, go ahead, Ryan.

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Um, one more that I might add, like

if, if you like, if you like credit.

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Um, and you think private

credit is maybe not the space

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for you, for whatever reason.

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Portfolio fit, valuation, concern,

fundamentals, um, like get into

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high yield, but with a credit hedge.

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I mean, we do this, um, one of

our portfolio, our, our high yield

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portfolio is built with benchmark,

like high yield exposure, but then

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we put a credit hedge on top of that.

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So if you, if you think I'm gonna

wanna be in this at some point,

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don't bother market timing it.

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Yeah, that's hard to do.

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Um, you know, but if you get into

something where you have a structural

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page that should cushion the exposure

in the event of a drawdown and adds to

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your return over the course of time.

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'cause it's not a direct

page, it's an indirect page.

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Mm-hmm.

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Um, that should be very valuable as well.

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Yeah.

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Fantastic.

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Chris.

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Lastly, whether it is through

managed futures or private credit

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or you know, some currency product.

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What should be the primary

considerations that financial

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advisors should consider when, you

know, incorporating these products?

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Obviously alignment, but is there anything

else that they should think about?

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And it really could be any alternative.

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I mean, there's so many different

alternatives out there, but Yeah.

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Uh, to me it's, um, peel, peel

back the label, like the, you know,

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label does not equate to risk.

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Hmm.

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Uh, understand what risks you

are underwriting and make sure

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that those are intentional.

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For example, um, you know,

this is a silly one, but we use

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a lot of total return swaps.

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We tend to be derivatives intensive.

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Um, a total return swap

entails some counterparty risk.

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Like it's a little foolish.

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It's quite rich of me to ask

my investors to get paid for

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underwriting counterparty risk.

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Like we should have that part down pat.

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Mm-hmm.

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So understand what.

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What exposures you're getting.

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Make sure you're getting paid for them

and that's before, you know, that's either

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before or after you get to the issues.

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You mentioned a fit within a portfolio.

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Yeah.

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Chris, fantastic.

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Love the conversation.

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Really timely, important conversation too.

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Like I, I agree that yes, there's some

issues out there and some of the, it

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is warranted with private credit, but.

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Is it a full blown on crisis?

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Probably not.

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Like the headlines say,

um, pick and choose.

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You gotta do your due diligence.

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Like maybe more, do more due

diligence now than before.

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But, um, fantastic conversation.

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Thank you so much.

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Such an honor to have your own.

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Where can our audience

get more information about

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simplify asset management?

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You can visit our website,

uh, www dot simplify us.

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Uh, please don't hesitate to reach out.

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There's an email, there's

a phone number on there.

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We'd be delighted to hear from you.

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Awesome.

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Thank you Chris, and thank you everyone

for listening to this episode of

388

zephyr's Adjusted for Risk podcast.

389

You can watch all of our other

episodes on the Zephyr YouTube channel.

390

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391

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392

Thank you very much and have

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393

Thanks everyone.

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Let's get started.