Blackstone Chief Executive Steve Schwarzman said the private credit industry will expand further even as critics warn of a bubble developing in the asset class.
The booming $1.7 trillion private credit market has come under increasing scrutiny in recent years after growing rapidly in the wake of global financial crisis and tougher capital restrictions on bank lending. For Blackstone, private credit accounted for the biggest gains among its strategies in the fourth quarter.
“Our default rate on these types of loans is three-tenths of 1%,” said Schwarzman in an interview in Tokyo on Thursday. “I don’t know if there’s a bank around that has a default rate that’s lower.”
UBS Group chairman Colm Kelleher said at the end of last year that risks were growing around a bubble in private credit. Rising global interest rates over the past two years have strained the finances of corporate borrowers, making it hard for many of them to keep up with interest payments.
“I have quite good confidence in our ability to do conservative credit extension,” said Schwarzman. He added that the asset manager’s own direct-lending business will come out of the current economic cycle in a “very strong position.”
Schwarzman traveled to Japan from China, where he and other US business leaders took part in a business forum. During his trip, he met with Chinese President Xi Jinping.
“The feeling I got is that at least from President Xi’s perspective, that they were very open to attracting foreign capital,” Schwarzman said. “They’ve had a huge decrease in foreign direct investment. So the way most people respond when they have something that’s unfavorable is they try and fix it.”
Blackstone is looking at the possibility of acquisitions in Japan and hopes to do deals in the country this year. The company is particularly looking at investments in the real estate and health care sectors, he said.
The company has also brought its investment products to retail investors in Japan. Through tie-ups with local securities firms, individuals can invest in the company’s private credit, private equity and real estate businesses.
“The world has concluded that something has changed in Japan in a positive way,” said Schwarzman. “And I agree with that.”
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