The Future of Private Credit and Asset-Backed Lending

Joined now by Stu Wall.

He is the CEO of Setpoint.

It is a platform for private credit.

Welcome, Stu.

Thanks for having me.

All right, so private credit has become a big story.

What is driving the growth?

So we are in the biggest CapEx boom in history, and private credit is playing a huge role in that.

So we've got about $4.4 trillion in CapEx this year.

It's the biggest, about 14% of GDP.

650 billion of that's coming from the five hyper scales, but a lot of that's coming from picks and shovels companies and people who are investing because of the big beautiful bills, really encouraging investment in the United States.

That's gonna drive GDP growth.

It's gonna drive productivity growth, and the demand for capital kind of outpaces the supply.

Private credit, I think, is stepping in to fill the void.

It's a little bit more long term oriented, a little bit more flexible than bank capital and public, uh, credit, and so I think it's playing a really exciting role in the growth that we're seeing right now for people who are just learning about.

That, what are you doing?

Yes, so Set point is the operating system for private credit or asset backed finance, and there's kind of two big buckets of private credit.

There's direct lending, so corporate loans to companies, um, you know, a really big component is asset backed.

So anything that's secured by an interest in collateral that could be a student loan, it could be a credit card, it could be a small business loan.

Um, all of that is this kind of multi-trillion dollar industry that still runs on infrastructure built like 30 years ago.

So email, Excel, and FTP folders, that kind of dated infrastructure is why you see issues like Tricolor, uh, committed fraud.

It resulted in billions of dollars in losses and, and some points here to fix that.

So we organize and verify asset data.

We do all the calculations for reporting and compliance, and we give this.

Ability that's really not possible with Excel so you can get an understanding of what's happening in your portfolio if you're a capital provider or an investor, and we really see kind of this new standard in private credit that's more transparent, more liquid than what we see today.

And what technology specifically are you using in order to achieve that?

So there's really 3 things that I think are super important.

So one, I mean, there's a lot of talk about AI.

I think it's incredibly important the industry we're in, so, um, there's a lot of kind of the most talented people in financial services, uh, most talented people in our economy doing manual things like looking at PDF documents and comparing that to a loan tape or staring and comparing from two different Excel files.

We think AI and LLMs have the potential to make those tasks much faster, more accurate, more efficient, and make products possible that weren't possible before.

But you have to combine them with an orchestration layer that kind of connects and and has deterministic software and experts.

You put those three things together and you can put something in production that is zero defect, that is auditible, and I think that results in a private credit ecosystem that has much better data, much less fraud, and ultimately is more liquid.

What does the next chapter of this market actually look like?

So I think you're gonna continue to see a massive boom in private credit that's gonna fund a lot of this CE spend that we see happening.

Um, and I think a lot of that's gonna be funded by retirement savings.

So kind of the world is short on retirement income, and I think what a lot of people are seeing, you know, I have a 401k, I'm sure you have a 401k.

I'm not gonna retire anytime soon.

I don't need daily liquidity, and I think a lot of retirement accounts are gonna start investing in private credit, which they are not daily liquid, but offer a premium and a great risk adjusted return.

I think that's gonna be a good thing for retirement savers.

It'll be a good thing for private credit.

And what that market needs really is a new standard where you have some of the things that public markets have where you can do things like a daily Nav, you have transparency in the assets, you make those assets more liquid.

That is the goal of Set point is to kind of play a role in that, and I think that's where we see the market, you know, in the next 5 to 10 years.

And what's next for Set point?

Um, yeah, I mean, I think we're, we're, we're really investing, I think, in creating creating this ecosystem, so our framing is where capital comes to work together and you have kind of borrowers and lenders that are coming together, and I think there's kind of two things that are happening.

One is, is, you know, there's a lot of trust that's built in those relationships.

Um, we kind of announced we're doing an event tomorrow with Cross River Bank.

We did an event a month ago with Andreessen Horowitz, our lead investor, as well as, uh, Blue Owl, and so, you know, building that trust.

In this counterparty relationships, but maybe more importantly creating a new standard.

So I think private credit historically has been very bespoke.

Um, all of the different facilities are different.

The reporting is different, calculations are different.

We think you can create a new standard in this industry that benefits the lenders, the borrowers, makes capital more accessible, uh, more liquid, you know, less, less fraud prone.

Stu Wall, CEO of Setpoint, thank you so much for joining us at the New York Stock Exchange.

Thanks for having me.