Finance
Peak Private Credit Fears Force Funds to Scrabble for Returns
- Funds are investing in smaller companies and riskier debt
- Spreads on like-for-like deals have fallen 100 bps since 2023
Private credit funds are sprucing up their returns by cutting their own costs and chasing riskier, higher-yielding business.
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In an effort to sustain the stellar returns of recent years, private credit funds are scrutinizing their cost of financing, switching up their investor base and targeting smaller, riskier businesses.
Blackstone Inc. and Apollo Global Management Inc. are negotiating lower borrowing costs for themselves and their funds in the bond market and have tapped the insurance industry for fresh funds. Blue Owl Capital Inc., Carlyle Group Inc. and HPS Investment Partners, meanwhile, are among the mega-funds that have started offering loans to companies once considered too small to be of interest.