Blackstone president Jonathan Gray pointed to private credit as the asset class with the most opportunity at the Forbes Iconoclast Summit on June 12.Private credit has gone from a backwater to the hottest asset class of 2023 with firms like Blackstone and Apollo jockeying for business, and assets approaching $1.5 trillion.
Private credit assets surpassed the $1.4 trillion value of all outstanding U.S. high-yield bonds last year, according to the International Monetary Fund’s latest Global Financial Stability Report released in April. Fundraising has slowed this year, but asset managers still had around $300 billion in dry powder in private credit funds last year, according to the IMF, and are continuing to put it to use. In this week’s latest major deal, chipmaker Wolfspeed announced Monday that it’s borrowing $1.
“The banks were chastened by the great financial crisis, and Dodd-Frank made it virtually impossible for banks to hold risky loans and assets,” says Chris Kotowski, managing director and senior analyst at Oppenheimer. “At the same time, you had this big expansion in the number of private companies looking for other sources of capital.”
Most private credit firms draw in money from pension funds, endowments and insurance companies, though individuals can also invest in the industry through dozens of business development companies. The Blackstone Private Credit Fund has $51 billion in assets and a 10.2% annualized yield. Credit specialists Ares Management and Owl Rock Capital and other major private equity firms like KKR and Oaktree have BDCs with similar yields.
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