Displaying items by tag: private credit

Empower, the $1.8 trillion 401(k) plan provider, will begin offering private credit, equity, and real estate investments in some retirement accounts later this year through partnerships with firms like Apollo and Partners Group. 

This move marks the largest entry yet of private assets into 401(k)-type plans, a $12.4 trillion market that Wall Street firms have long sought access to. While proponents argue private assets can enhance returns and reduce volatility, challenges remain—such as illiquidity, valuation complexity, and higher fees, which range from 1% to 1.6% versus the 0.28% average for typical target-date funds. 

Only select managed account services will offer these investments, with five employers already signed up to participate in the initial rollout. Allocations could range from 5% to 20% of a portfolio, depending on factors like age and risk tolerance.

Finsum: Private markets have definitely gone wide in the last decade but this sort of expansion could really help retirees. 

Private credit managers often tout their locked-up capital as a key strength, insulating them from the kind of liquidity runs that plagued banks like Silicon Valley Bank. However, the rise of evergreen vehicles—funds allowing periodic redemptions—has introduced new vulnerabilities, especially as firms like Blackstone and Apollo have raised nearly $300 billion from retail investors. 

While evergreen funds offer some liquidity and mass appeal, especially through wealth advisors, their structure forces managers to continuously invest and meet redemptions, reducing the strategic flexibility that once defined private credit’s advantage. 

This could erode returns, particularly if managers are pressured to lend during inopportune times or sell illiquid assets at discounts to meet withdrawals. Though redemptions are capped and many investments naturally mature over time, a crisis could still lead to redemption surges that slow new lending and strain fund performance. 

Finsum: As evergreens attract less experienced investors and chase more capital, the sector risks undermining its own resilience unless managers remain disciplined and transparent.

Global private credit is staging a recovery from a decade-low slump, driven by stronger-than-expected global GDP growth and a gradual shift toward looser monetary policy. 

Although deal activity remains below historical norms, transaction volumes grew 7% last year, with deal values rising 15% to $3.5 trillion, bringing the market closer to pre-pandemic levels. Despite lingering valuation gaps and geopolitical uncertainty, optimism is building for a stronger M&A rebound in 2025, which could further boost private credit’s rapid ascent as an alternative financing source. 

The asset class has cemented itself as a critical pillar of corporate lending, filling the gap left by traditional banks and offering borrowers more tailored, flexible funding solutions. Investors are increasingly drawn to private credit’s ability to deliver stable returns and diversify portfolios, fueling further expansion in the sector. 

Finsum: As dealmaking momentum builds, firms are poised to capitalize, leveraging their global network and deep industry expertise to connect capital with opportunity.

The rise of private credit has reshaped the landscape of speculative-grade debt, absorbing many of the riskiest borrowers that once relied on public high-yield bonds. With banks retreating from direct lending due to regulatory constraints, private credit firms have stepped in, fueling a market now worth $2.5 trillion globally. 

This shift has left the high-yield bond market with a stronger credit profile, narrowing yield spreads and reducing volatility. However, private credit’s lack of transparency means that credit risk hasn’t disappeared—it has simply moved to a space where prices and risks are less visible. 

While public high-yield bonds have become scarcer and more expensive, some riskier borrowers are returning to public markets through structured investment vehicles. Ultimately, as economic conditions shift, both public and private debt markets may face renewed pressures, exposing hidden risks within private credit’s rapid expansion.

FINSUM: Though private credit obscures some risks, economic stress could still expose vulnerabilities across both public and private debt markets.

JP Morgan Asset Management is gearing up to introduce its first private credit interval fund, aiming to expand its footprint in private credit. This newly registered credit markets fund, filed with the SEC, will be accessible to wealth market investors. 

The fund plans to maintain a diversified portfolio that includes loans, bonds, structured finance securities, and other credit-related investments. Interval funds, like this one, provide access to private market assets with periodic liquidity windows, balancing stability with limited redemption opportunities. 

To manage liquidity, a portion of assets will be allocated to short-term debt instruments, money market funds, and cash reserves. 

FINSUM: As investor demand for private credit grows, asset managers are increasingly tailoring products to individual investors seeking diversification.