Private debt AUM could hit $2.7tn by 2028
Private debt assets under management (AUM) could soar as high as $2.7tn (£2.1tn) by 2028, with direct lending expected to remain the largest segment of the market.
A new report from PitchBook said that its base case sees private debt fundraising growing at the recent annual trend of 6.9 per cent and AUM settling at $2.3tn in 2028, but this could grow to as much as $2.7tn in a good case scenario and a little as $19tn in a bad case scenario.
Read more: Private credit experts slam claims that sector does not offer higher returns
It expects direct lending funds to remain the largest category, nearing $900bn by 2028, although this could reach $1tn in AUM in the good case scenario – double the volume from 2022’s level.
“The current economic environment continues to be a boon for private debt as all-in yields are supported by elevated central bank policy rates and default rates are not signaling alarms,” the report said.
“The floating-rate feature of private debt helped weather the rate-hiking storm of 2022 and provided diversification to typical equity and duration portfolio risks.
“Default rates—proxied by the Morningstar LSTA Leveraged Loan Index—have been ticking up since the lows of 2021 but have settled around long-term median levels. “Another attractive feature of private debt is the ability for GPs to work closely with portfolio borrowers to amend terms and reprice as necessary. These characteristics may be key as the higher-for-longer rate regime stresses middle-market borrowers.”
Read more: Emerging ‘bifurcation’ of quality in middle market private credit
Read more: Fitch: Competition in private debt is intensifying