The private credit 'golden moment'

3 mins read

A recent article by the Financial Times has brought to attention the global scale of the private credit asset class with US$1.5 trillion in AUM, making it larger than both the US high yield and leveraged loan markets for the first time in history.


Data shared by Goldman Sachs shows volatility-adjusted annual returns of direct lending versus classic high-yield bonds and leveraged loans reflecting why this asset class holds the promise of both smoother and stronger returns for investors. Another global asset manager believes private credit has in fact outperformed high-grade fixed income and leveraged finance assets in every prior cycle.


Not surprisingly, coined a “golden moment” for the industry by Blackstone's Jonathan Gray, other financial titans have also echoed the industry’s potential and have been eager to capitalise on the private credit domain. Moreover, with the banks’ limitations on lending, capital market expansion, this space is expected to grow significantly over the next decade.


Despite the success and potential of the industry however, the article also notes that caution is warranted. That said, we believe that this asset class has been around for several decades for a reason. Top managers in various geographies have navigated its fair share of events and generated strong returns, making private credit a “cycle tested and tried asset class.”


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