Private Credit Is the Hot New Thing on Wall Street. But What Is It?
It sounds mysterious, but it’s really just a loan—often a risky one—made by an investment fund instead of through a bank.
Illustration: Kate Prior for Bloomberg Markets
Hedge funds? Quant trading? Old news. These days, everyone within shouting distance of Wall Street is talking about private credit—even if some of those people might admit that they still aren’t 100% sure what private credit is.
The industry is minting billionaires. It’s become a huge chunk of the assets of private equity giants such as Blackstone, Apollo Global Management and KKR, so much so they now want to be called “alternative asset managers.” The new crop of prestige companies in Manhattan—the places that ambitious young bankers are jumping ship for—are private credit specialists. The draw is the promise of high returns, chunky management fees and the thrill of a market that’s grown by more than $1 trillion in assets under management in only a decade. But that name, private credit. It could mean almost anything. Haven’t people been privately lending money to each other forever? Isn’t that just what a bank does?