Private credit is growing as a financing option, outperforming for investors

Private credit is growing as a financing option, outperforming for investors
American Investment Council says the market continues to expand.
MAY 07, 2024

The private credit market is offering a lifeline for businesses and strong returns for investors, according to a new report.

The American Investment Council says that small and middle market businesses are increasingly leveraging private credit for M&A transactions without private equity sponsors and are outpacing the broadly syndicated loan market. For businesses unable to secure traditional bank lending at all or of the size required, private credit is providing another route.

“Private credit is playing a crucial role in supporting businesses and delivering impressive returns for investors, especially in uncertain times,” said Drew Maloney, President & CEO of the American Investment Council. “The industry’s resilience and flexibility are filling market gaps and providing customized financing solutions. Private credit has become indispensable for businesses seeking financing and is increasingly becoming their preferred option.”

The AIC report, using Pitchbook data, says North American private credit vintages from 2017 and 2018 are showing distributed/paid-in multiples exceeding 0.5x, that is they have already distributed half their total value to investors.  In 2022, private credit funds had an internal rate of return of 7.59% compared to a return of -3.24% for the Morningstar US high yield index.

The AIC’s research suggests that growth will continue with investors committing almost $1.3 trillion over the past decade including almost $138 billion in 2023 alone. Funds have almost $341 billion of dry powder available to lend currently.

But as popular as private market investments are, particularly in the institutional space, nobody should expect them to become a staple fixture in people’s retirement plans anytime soon, according to new research from Cerulli.

Latest News

DeSantis unleashes ‘Florida DOGE’ in quest to kill property taxes
DeSantis unleashes ‘Florida DOGE’ in quest to kill property taxes

To help fund the proposal, the governor and Florida's finance chief are probing municipal finances on a "local government accountability tour" to uncover potential waste.

Edward Jones job cuts and buyouts hit 811 employees
Edward Jones job cuts and buyouts hit 811 employees

Edward Jones’ job cuts and overall realignment internally are contributing to higher costs for the company, it said in its recent quarterly report.

Advisor moves: LPL nabs $715M team from Cetera's Avantax community
Advisor moves: LPL nabs $715M team from Cetera's Avantax community

Meanwhile, Fifth Third's RIA arm adds a former billion-dollar BNY trio in Boulder, Colorado, while a hybrid RIA opens a new North Carolina location with a former Raymond James-affiliated team.

Tax compliance costs US economy over $536B, Tax Foundation finds
Tax compliance costs US economy over $536B, Tax Foundation finds

Analysis highlights swelling out-of-pocket costs and wasted time on paperwork, with an outsized toll on businesses and around crypto transactions.

Raymond James taps Allianz alum in continued push into ETF space
Raymond James taps Allianz alum in continued push into ETF space

The appointment to its investment management arm comes roughly a year after the firm first announced plans to launch its own exchange-traded fund platform.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.