News
Market Convergence · Private Credit · Public Debt · Underwriting Risk
Private credit, projected to reach $5 trillion by 2029 from $3 trillion in early 2025, increasingly mirrors public bond markets, blurring traditional distinctions and expanding its role as a mainstream financing solution, according to Morgan Stanley and J.P. Morgan.
Private credit, once a niche, now offers equivalents to public market fixed-income sectors like investment-grade loans, high-yield debt, and asset-backed financing, as noted by Emily Bannister of Wellington Management. This convergence, driven by banks' pullback, borrowers' demand for bespoke capital, and investors' search for yield and diversification, has seen private credit ticket sizes scale from $75 million to routinely supporting billion-dollar deals, Christopher Acito of Gapstow Capital Partners stated.
However, this growth raises concerns about aggressive underwriting, weaker covenant protections, and potential for managers to accept credit risk without commensurate reward, as warned by Bannister and Danielle Poli of Oaktree Capital Management. The First Brands default highlighted these risks, and investors face challenges like unintentional double exposure and a lack of true secondary market liquidity, according to Putri Pascualy of Man Group.
Regulatory reports also flag systemic risk from highly leveraged non-bank lenders.
Bank of America: Private Credit Stress, Defaults Rise
Private Credit Blurs Public Lines, Underwriting Risks Rise(current)
