Blackstone: High-yield bonds, leveraged loans still 'frothy'

Joseph Baratta, in an image from a Blackstone video
Source: Blackstone
Joseph Baratta, in an image from a Blackstone video

One of the world's leading private market investors still thinks that some bonds and loans are dangerously priced.

"Sub-investment grade corporate credit markets are as frothy as they've been," Joe Baratta, Blackstone Group's global head of private equity, said Tuesday at the Wall Street Journal Private Equity Analyst Conference in New York.

Baratta, noting the single-digit interest rates offered by leveraged loans and high-yield or "junk" bonds, said such prices were "unprecedented" and "not unsustainable."

At the last conference in September 2013, he noted an "epic credit bubble" in the same relatively low-quality loans and bonds.

Read More Blackstone: We're in an 'epic credit bubble'

On Tuesday, he said such pricing wasn't broadly dangerous.

"I don't think that creates some sort of systemic risk or risk to the U.S. economy. It's a very narrow part of the overall credit market that we play in," he said.

Still, Baratta said he hoped for a correction in those credit markets.

"I wish there was some reversion to mean in the cost and availability of credit because I think on the margin that is driving up valuations in the market we play in," he said.

Generally, Baratta remained bullish on the opportunity for private equity firms like Blackstone despite the relatively high cost of buying companies.

"I do believe that our ability to control the exit, buy good companies, intervene in them to drive up earnings and cash flow, will I think enable us to outperform all the other asset classes," Baratta said.

Still, he noted that Blackstone had slowed the pace of its investments given high valuations. Baratta said his Blackstone unit had invested $1 billion to $1.5 billion in company buyouts the first half of 2015, a rate that is "a lot slower" than in previous years.

Publicly traded Blackstone managed $310 billion overall as of March 31.