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Blackstone tips private credit market to reach US$25 trillion

Private credit is booming across the globe, and while a bullish prognostication from alternative asset manager Blackstone won't surprise there is enough evidence to suggest the prediction is likely accurate.
Private debt

New York-based alternative asset manager Blackstone Inc. has tipped the global private credit market to grow almost 15-fold from US$1.7 trillion to $25 trillion, with a confluence of factors combining to steer capital into what has become the fastest growing asset class in recent years.

Speaking on Bloomberg Television this week, Blackstone’s global chief investment officer for credit and insurance, Michael Zawadzki (pictured), spoke about the “massive whitespace of growth” for the nascent sector.

What’s astonishing about the forward potential of the private credit market, he explained, was that the industry has remained at such an undeveloped level for so long. Private credit is still in its relative infancy, Zawadzki went on, and has immense room to grow.

  • “I hear people say that it’s early innings,” he said, “but I think we’re still in batting practice.”

    There are three “generational megatrends” fuelling the development of private credit provision, the CIO believes; higher base rates, which provide “equity-like returns with credit [level] risk”, the “secular shift” from banks to private credit providers, plus the proliferation of product strategies that providers can now offer clients, which includes everything from investment grade through to sub-investment grade credit, corporate credit, real asset credit and structured credit.

    “We’re really covering the waterfront in terms of the opportunity set,” he added.

    Zawadzki declined to put a timeframe on his prediction that the sector would reach $25 trillion, but said the biggest driver of growth would be the private investment grade opportunity set. “[It’s] really huge, and really attractive for clients because it offers excess spread with very low credit risk. And it offers diversifying exposure in areas like asset-backed finance and infrastructure credit, which are really compelling in today’s market.”

    Global (and local) thematic

    Zawadzki’s bullish prognostication on the opportunity set for private credit won’t surprise, given that the investment class has the potential to help expand the alternative asset manager’s footprint considerably. But his view does scan both overseas and domestically.

    Last week, a major global study from US business administration giants CSC revealed that 46 per cent of investment executives believe conditions for private markets will improve over the next five years, with “far more optimistic sentiment” than ever before.

    In Australia, early this month listed alternative asset manager Regal Partners showed its own interest in the sector by paying AU$235 million for private credit specialists Merricks Capital and its $2.9 billion of FUM.

    At the time, Regal’s representatives said it was “highly positive” on the outlook for private credit in Australia, with demand set to accelerate as traditional loan providers (ie banks) pulled back from the business lending market. “Private credit is an asset where scale, underwriting expertise and consistent access to attractive deployment opportunities are a key contributor to positive returns,” Regal added.

    Speaking to The Inside Adviser recently, KeyInvest chief executive argued that private credit is becoming so ubiquitous now that it would struggle to fit into the alternatives sleeve of investment portfolios.

    “If you look at the number behind private credit in Australia, we’ve gone from $130 billion in funds under management at the end of 2021 to $188 billion at the end of 2023,” Brooke said. “So the question for me becomes, is it big enough to be its own asset class? I think it’s increasingly likely that it’s becoming the latter.”

    Tahn Sharpe

    Tahn is managing editor across The Inside Network's three publications.

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