The GFC taught The Big Short's Greg Lippmann one lesson - he thinks markets have forgotten it

You may not know Greg Lippmann's name, but you'd know his character - the fast-talking, confident Wall Street trader played by Ryan Gosling in The Big Short, the film about a group of investors who saw the GFC coming and shorted the US housing market before it collapsed.

While Lippmann didn't walk into the Livewire office saying "I smell money" (unfortunately), the famous presentation he circulated was indeed very real, and landed in the inbox of Jacob Mitchell, now founder and CIO of Antipodes Partners. At the time, Mitchell was at Platinum, and one of his roles was covering the housing sector.

That was the start of their connection. Nearly 20 years on, Mitchell and his team have been monitoring the build-up of risk in private credit.

"We've done a lot of work looking at where we see the buildup of risk and credit and - very different to the GFC - it now looks to be in the lower quality corporate lending and we really wanted to sort of test our thesis with someone who I really respected."

Mitchell reached out to Lippmann when he was visiting New York in March this year. Lippmann is the founder and CIO of LibreMax Capital, a securitised credit specialist. Their thinking aligned, and Mitchell invited Lippmann to Australia to share the thesis with local investors.

In the panel interview above, Mitchell and Lippmann are joined by Daniel Saldanha, head of credit at Antipodes Partners, to discuss the building risks in global credit markets and the implications for investors.

Private credit risk in 2026

According to Mitchell, US private credit has grown to over US$1 trillion and represents the lowest quality segment of a roughly US$4 trillion non-investment grade market. He argues that rapid growth has degraded lending standards, with too much capital chasing a finite number of deals. He's clear that Australian private credit, which tends to be property-backed, is structurally different to US private credit market:

"It tends to be a very aggressive lend to a business as opposed to property. And our thesis is that the asset class at this scale has never been tested in a recessionary environment. 

Based on our analysis of S&P data, we think it does have a lot more sensitivity than many investors realise to defaults to that recessionary environment."

When I put the recent flood of bad news stories about private credit to Saldanha, he drew a distinction between the institutional and retail ends of the market. 

Major super funds have generally locked capital in for the long term and are careful about manager selection. Retail vehicles, on the other hand, have sought to replicate institutional returns while offering more flexible liquidity, creating a mismatch.

"Financial markets are great at creating asset liability mismatches. We don't think it's a disastrous GFC-like event by any means, but we do think there will be mistakes," he says.

For Australian investors with private credit exposure through super or retail funds, Saldanha says that "the main thing is to ask about the quality of portfolio construction, the quality of credit underwriting, and really whether there's any leverage in those structures."

How this is showing up in equities

Antipodes has been running shorts on private credit and private equity managers in its global long/short fund, which paid off when those stocks sold off on software financing concerns.

Mitchell explains: "Coming out of COVID, the SaaS business model was seen as the hottest business model on the planet. Valuations were very punchy. And at the same time, there's some very high-profile, take-private equity deals funded by private credit. And some of those deals have recently started to unravel."

In Mitchell's view, AI disruption wasn't the catalyst; rather, it was lower-quality software businesses carrying too much leverage. Antipodes has largely covered those shorts and the focus now is on hedging recession risk.

"If you can find a hedge that is sensitive to private credit, I think it's a very valid hedge to have in the portfolio," he says.

More broadly, Mitchell sees equity markets as more fragile than they appear. Most capital is flowing into passive and systematic strategies, and they're all starting to look increasingly similar. For the active investor, he says, "if you can build a portfolio, there's a lot of valuation dispersion in equities, similar to credit"

"The benchmark risk is AI. If you can build a portfolio with less AI beta than the benchmark, I think that's a great thing."

AI capex and debt 

Mitchell estimates AI capital expenditure has reached roughly 3% of US GDP and is heading higher, with more of it now financed through credit markets.

As hyperscalers start competing for the same debt as the US government, Mitchell sees pressure building in treasury markets, and "there would be a very negative feedback loop back to private credit and broadly to asset prices by the discount rate."

Within AI itself, he views hyperscalers as a lower-risk exposure, as they can layer services across a diversified client base, compared to semiconductors and neo-cloud operators, who primarily rent GPUs and carry high leverage.

Corporate stress, consumer resilience

It's a concern that connects to what Lippmann sees as broader stress in the US economy - corporate borrowers carrying high leverage, with fewer protections for lenders than ever before.

Lippmann traces the divergence directly to post-GFC regulation. "We have a situation in the US where consumer debt is more fixed rate and more tightly underwritten than it ever was before," he says.

Capital that might have gone into mortgages flowed instead into corporate markets. Leveraged loans grew, and in turn private credit grew, and lender protections eroded along the way.

"Before the great financial crisis, about 25% of all leveraged loans were covenant-light. Recently, that number's been more than 90%," Lippmann says.

Mitchell points instead to a divergence within the consumer economy itself. Lower-income households are holding up, with roughly 42% of their income growth over the past five years supported by government spending. For the wealthiest 20%, 52% of income growth has come from the wealth effect directly tied to equity markets.

"You could actually have a recession that is triggered by a decline in asset prices. There's been a financialisation of the economy."

The rate risk most investors aren't ready for

In Lippmann’s view, interest rates could rise materially, and most investors aren't positioned for it. 

His concern is complacency. Sovereign bond yields are hitting highs not seen in decades, and most market commentary treats that as a sign we're near the peak. On a 20-year lookback, current rates do look elevated, he says, but go back to 1966, and they're not particularly high at all.

"A lot of people have been in the market since 2006 and they can't really envision rates being materially higher than they are today. I think that's an underappreciated risk."

If there's a positive takeaway on credit, Saldanha says that for investors in or approaching retirement, well-constructed credit portfolios still do the job. Credit markets are showing significant dispersion right now, and for investors willing to be active, that's a real opportunity.

"Regardless of the movement in spreads, you eat yield, so yields and distributions matter." 

"And what credit portfolios do is they increase income, they reduce volatility, and they also prevent bigger drawdowns in big markets in a balanced portfolio. I think that holds through the cycle."