Displaying items by tag: private credit

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.

JPMorgan Chase is committing $50 billion to finance riskier companies backed by private equity as it expands into private credit. The bank has already deployed $10 billion across more than 100 deals since launching its direct lending push in 2021. 

Traditional lenders, including Citigroup and Wells Fargo, have formed partnerships with private credit funds, while Goldman Sachs and Morgan Stanley rely on their wealth management divisions. JPMorgan's move reflects the sector’s rapid growth, fueled by insurers, pensions, and sovereign wealth funds seeking higher-yielding investments. 

Private credit has increasingly replaced traditional debt markets, especially during market downturns, prompting banks to reclaim lost ground. While demand fluctuates with market conditions, JPMorgan aims to bolster its role in this evolving financial landscape.

Finsum: Banks are making a huge splash in the recent PC market and its worth monitoring how it evolves. 

Apollo has introduced a tokenized private credit fund, partnering with Securitize to offer on-chain access to corporate lending and structured credit. The fund, available on Solana, Ink, Ethereum, Aptos, Avalanche, and Polygon, marks Securitize’s first integration with Solana and Kraken’s layer-2 network, Ink. 

Apollo Diversified Credit Fund, managing over $1.2 billion, delivered an 11.7% return in 2024, significantly outperforming U.S. Treasuries. Christine Moy of Apollo highlighted its role as a stable, high-yield complement to crypto assets and tokenized treasuries. 

Private credit tokenization is gaining traction, with Securitize CEO Carlos Domingo noting its potential alongside falling interest rates. Apollo sees this initiative as a stepping stone toward decentralized finance innovations, including automated portfolio rebalancing and smart contract-driven collateral management.

Finsum: This is an interesting crossover and perhaps crypto is a natural path to get more alt exposure. 

The private credit market faces significant risks due to relaxed lending standards and the influx of capital, warns Nick Moakes of the Wellcome Trust. He anticipates substantial losses for investors if the U.S. economy enters a recession. 

While private credit is less systemically risky than traditional banking, diminished checks on borrowing have raised concerns. Rating agency KBRA projects defaults in the sector to rise to 3% by 2025, driven by higher interest rates and vulnerable business models. 

Moakes also criticized large alternative asset managers, noting their focus on asset growth may not align with investor interests. Despite the risks, the Wellcome Trust avoids direct private credit investments but monitors the market through its private equity allocations.

Finsum: With rates moves slowing down we think private credit could have an advantage over traditional fixed income products.