Private credit “blitzscale” sees competition intensify
A “blitzscale” of established funds has led to increased competition in the private credit market, as many smaller managers struggle to keep up.
According to a new report from credit solutions platform Configure Partners, the rapid growth of private credit has been fuelled by a clutch of larger asset managers with established brands who have been able to rapidly scale up their business by offering more competitive terms and pricing. These larger firms have also been able to quickly raise new capital and capture a larger market share.
As a result, smaller asset managers have struggled to raise capital at the same rate and this has impacted on their hold sizes and renewal desires for their underlying credit investments.
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Configure said it had seen a number of borrowers in 2023 constricted with capital-constrained credit funds.
According to the firm’s most recent quarterly statistics, private credit fundraising of $5bn+ (£3.85bn) funds has nearly doubled, accounting for 43 per cent of all capital raised in 2023 versus 22 per cent in 2022.
Configure’s managing director James Hadfield warned that the ever-changing landscape of lenders means that investors should be aware of supplier concentration, as well as the “fundamental ebb and flow of how credit fund interest in new opportunities may expand or contract, given the multitude of macro factors shaping this fast-growing yet still nascent market.”
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“There are causes to this ebb and flow outside of the fundraising process that affect lender velocity and appetite for new deals, as well as effects that come hand-in-hand with the change,” Hadfield said.
“Factors such as increased market demand for private credit resulting from increased regulatory issues from the traditional banking market, more funds in the market leading to more optionality, and the overall need for fund rebalancing — there is more to the story than first meets the eye.”
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