Enterprising Investor: Mark Higgins, CFA – Private Credit, Caution, and the Lessons of Financial History

Release Date: June 1, 2025
Host: Laura Moberg (Guest: Mark Higgins, CFA)
Recorded At: CFA Institute Annual Conference

Introduction

In this insightful episode of the Enterprising Investor, Laura Moberg engages in a compelling discussion with Mark Higgins, CFA, a seasoned financial historian and Senior Vice President at IFA Institutional. Recorded live at the CFA Institute Annual Conference, the conversation delves deep into the nuances of private credit, the cyclical nature of alternative asset classes, and the critical lessons gleaned from financial history.

Mark Higgins: Background and Expertise

Laura begins by introducing Mark Higgins, highlighting his extensive experience of over 14 years in advising both small and multibillion-dollar plans. Mark is not only a respected advisor but also a financial historian with a popular book titled Investing in US Financial: Understanding the Past to Forecast the Future. His role on the Museum of Finance American Finance Editorial Board further cements his authority in offering a historical perspective to current financial practices.

“The more you extend your memory by essentially absorbing the memories of our predecessors, the more you see the same things happen over and over again.” — Mark Higgins [02:04]

The Current State of Private Credit

Mark provides a cautious outlook on the burgeoning private credit sector. He draws parallels between the current surge in private credit investments and previous surges seen in venture capital during the 1980s and 1990s, buyout funds, hedge funds in the late 1990s, and even whale investments in the late 1800s.

“The asset flows into private credit have accelerated substantially, which is consistent with what we saw with other alternative asset classes.” — Mark Higgins [02:24]

He emphasizes that while there are opportunities within private credit, the sector is currently in a late phase of its investment cycle, characterized by excessive capital chasing limited high-quality opportunities. This environment increases the risk of downturns, making it imperative for investors to exercise heightened caution.

“If you just bluntly allocate to private credit and rely on generic recommendations, it's probably not a good time to get in.” — Mark Higgins [02:52]

The Cycle of Alternative Asset Classes

Mark elaborates on the cyclical nature of alternative asset classes, explaining that each surge typically follows a similar pattern: an initial legitimate market void fills up as early adopters flood the space, often leading to over-allocation and diminishing returns.

“We are in a late phase of that cycle that we've seen before. It's not average is not going to be acceptable. You need to be consistently top quartile.” — Mark Higgins [04:09]

He warns against complacency, noting that many investors mistakenly believe being "average" is sufficient in such saturated markets. Instead, only those with exceptional skill and performance can sustainably add value.

The Role and Skepticism of Consultants

A significant portion of the discussion centers on the influence of consultants in the investment management industry. Mark expresses skepticism about the expanding role of consulting firms, arguing that their recommendations often lead to over-diversification and investment in overpriced asset classes without sufficient expertise.

“The largest 10 consulting firms have literally tens of trillions under advisement. It's not mathematically possible for them to add value in aggregate if they have tens of trillion dollars.” — Mark Higgins [07:07]

He criticizes the reliance on consultants who may base their advice on short-term performance metrics, which can be misleading and fail to account for the long-term sustainability of investment strategies.

Historical Lessons and Modern Portfolio Theory

Drawing from his expertise as a financial historian, Mark discusses the pitfalls of Modern Portfolio Theory (MPT) when misapplied. He points out that many institutions rely on unreliable assumptions and overcomplicate their portfolios without the necessary skill to manage alternative asset classes effectively.

“If you're going to enter the space because someone just tells you to allocate to it based on an assumption, that is not enough.” — Mark Higgins [14:00]

Mark advocates for a more diligent approach, emphasizing the importance of track records and thorough due diligence over purely model-driven investment decisions.

Looking Forward: The Future of Private Credit

Mark anticipates that the private credit market will continue to face challenges due to the oversupply of capital and the scarcity of high-quality investment opportunities. He advises investors to remain cautious, focus on skillful management, and avoid following trends blindly to navigate the evolving landscape successfully.

“Private credit is squarely there, it's not average is not going to be acceptable. You need to be consistently top quartile.” — Mark Higgins [06:02]

Conclusion

The episode wraps up with Mark expressing optimism that the discussions at the conference, including contrasting views on private credit, will lead to more informed and prudent investment decisions among professionals. His balanced perspective underscores the importance of learning from financial history to avoid repeating past mistakes.

“Everyone benefited from that session from hearing from an asset manager who is more bullish on this sector and somebody who's skeptical. They'll make a better decision because they heard both sides.” — Mark Higgins [16:03]

Final Thoughts

Mark Higgins offers a thought-provoking analysis of the private credit market, grounded in historical context and a critical examination of current investment practices. His insights serve as a valuable guide for investment professionals navigating the complexities of alternative asset classes in an increasingly crowded market.

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