Private Credit Is Hot. But Has It Gone Silly?
For now, no. Bigger, veteran operations are getting the lion’s share of business. Newbies still need to prove themselves.
Outside Blackstone headquarters in New York.
Photographer: Michael Nagle/BloombergPrivate credit is an asset class that has blossomed alongside the Federal Reserve’s rate hikes. From sovereign funds to family offices, many people want to put their money in. Asset managers are more than happy to latch onto this enthusiasm. Private-equity firms are racing to raise funds, hoping to diversify from their long-time cash-cow buyout business, which has grown a bit tired with the end of the zero-rate era. The likes of BlackRock Inc. are also beefing up operations, buying up private-debt specialists.
The lure of private credit is obvious. Borrowing costs are staying higher for longer. Loan demand is there because banks are pulling back. The US economy appears to be heading into a soft landing, not a recession. Plus, these lenders have the regulatory green light — they’re seen as useful shock absorbers, not troublemakers who can pose systemic risks. By now, private credit is a $1.5 trillion asset class, bigger than high-yield corporate bonds or leveraged loans.