Private credit market passes $3tn valuation
The global private credit market has passed $3tn (£2.38bn) in assets under management (AUM) and continues to grow.
New research from the Alternative Credit Council (ACC), the private credit affiliate of the Alternative Investment Management Association, found that corporate lending remains dominant with 60 per cent of the overall AUM, while asset-backed, real estate, and infrastructure debt account for the remaining 40 per cent of the market.
The research also found that private credit lenders invested $333.4bn of fresh capital in 2023, up from $203bn the previous year. The largest private credit managers were responsible for 80 per cent of the capital deployed.
“Surpassing $3tn in assets is a remarkable achievement for the private credit industry, especially in a challenging macro environment,” said Jiří Król, global head of the ACC.
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“Our research shows that private credit’s stability stems from its strong structural foundations – aligned interests between managers and investors resulting in robust long-term capital backing. The sector enhances financial stability through fund structures that avoid liquidity and maturity mismatches and consistently low levels of leverage. This makes private credit a resilient force in today’s financial landscape.”
The research suggested that increased stress on borrowers during the past two years is being reflected in adjustments to loan terms and valuations reported to investors. There has been a “significant” rise in loan term adjustments from, on average, eight per cent of loans in 2023 to a little under 12 per cent in 2024 as lenders manage their loan books, the report added.
The ACC data also showed that private credit funds use modest leverage, with 51 per cent employing between 0.1x and 1.5x of debt-to-equity leverage ratios, while 31 per cent of funds are unlevered. This is consistent with the leverage used by private credit funds over the past 10 years.
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“Private credit has been the fastest-growing alternative asset class over the past two decades,” said Vincent Remy, EY Luxembourg private debt leader.
“The research shows that the sector continues its steady growth despite headwinds. Private debt markets also expand into new geographical markets and into a variety of new debt strategies.
“Whilst institutional money constitutes the main source of financing, retail and insurance capital have played a more significant role. The rapid growth has gathered increased attention from regulators, yet the sector continues to provide a vital source of alternative financing to the real economy which benefits both borrowers and investors.”
Around 50 per cent of investors expect to increase their investment in the US, European and Asian markets over the next three years, driven by a desire for diversification and ongoing bank retrenchment.
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