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Private credit: rate cuts, new growth, more partnerships

October 23, 2024 3 min read

Read more insights and analysis around private credit

The global private credit market continues to evolve at seismic speed as alternative asset managers and banks rapidly adapt to growing calls for capital and higher returns among an expanding base of borrowers and investors.

Alternative asset managers are once again breaking new ground as they line up first-ever private credit ETFs and increasingly larger bank partnerships – the latest chapter in private credit's accelerating transformation. On 10 September, Apollo Global and State Street said they had filed with the SEC for a private credit ETF targeting not just wealthy individuals, but individuals of any income (see report). Apollo also announced a partnership agreement on 20 September with BNP Paribas which is committing an initial $5 billion in funding for investment-grade, asset-backed deals originated by Apollo and Atlas SP, which it bought last year from Credit Suisse.

Close on the heels of this announcement, Apollo announced a $25 billion private credit direct lending program with Citigroup on 26 September, which will focus on providing high-yield direct lending to corporates, initially in North America, with the potential to expand to other regions (see report). Even if some ventures don't pan out as planned, new asset classes and investors will continue to drive a still expanding private credit universe.

 

Private credit 2025 bank survey: Rapid growth of bank funding to private credit matches pace of capital raising in sector

Our global survey of banks engaged with private credit shows high loan growth, mainly in asset-based lending and subscription credit facilities, though exposures are moderate compared with total loans.

  • Responding banks had $525 billion in loan commitments to private credit as of year-end 2023, but exposures are moderate relative to total loans
  • Loans are most commonly extended to bankruptcy-remote vehicles secured by middle market direct loans
  • Sector and risk are concentrated, with a few of the largest private credit managers accounting for significant parts of the asset class pool
  • Well-structured collateral helps mitigate high leverage typical of middle market loans

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(Also available in: 한국어)

 

As private credit rapidly expands, regulatory attention will likely grow

Asset managers are rapidly building capital clout, reaching deeper into retail, and forging bigger bank partnerships. Such moves are putting more focus on transparency.

  • Partnerships are fueling quest to become one-stop financial shop
  • Direct lending competition will intensify
  • Rapid growth could lead to heightened regulatory attention

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Non-bank lenders eye bigger role in fund finance

Private markets growth has driven higher demand than supply of fund financing, creating opportunities for nontraditional lenders such as insurers and alternative asset managers.

  • Subscription credit facilities have become core financing tools for private funds
  • Need for more credit availability will open sublines market to new entrants
  • Growing share of high-net-worth investors may limit access to sublines

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Learn more by following our ongoing thought leadership campaign, with new updates coming this week. Our expert analysts from Moody’s Ratings will guide you through shifts and trends across the sector so make sure to bookmark our private credit topic page.