The age-old activity of lending money, and getting it paid back with a bit of interest, feels pretty prosaic at a time of escalating wars and climate disasters on the one hand, and gung-ho hype about artificial intelligence on the other. But in one corner of corporate lending, where private capital groups are expanding aggressively into a space once dominated by banks, all of the above is coming together in an excitable cocktail of risk and opportunity.
Precise definitions and growth projections of the so-called private credit market differ. But whether you take the IMF’s view that this is a $2tn-a-year industry, or JPMorgan’s that it tops $3tn, experts seem to agree on one thing: the growth pattern of recent years is only going to accelerate. After expanding by 50 per cent over the past four years, Morgan Stanley believes the sector is set to balloon by 90 per cent over the next four. Private capital giant Apollo said last week that it aimed to double its assets under management to $1.5tn by 2029, powered by an annual $275bn of private credit.
To date, the principal narrative in this area has been a straightforward one of traditional private equity groups launching into corporate “direct lending” and stealing the lunch of banks that had been cowed by the 2008 financial crisis and the tougher regulation that followed.