The global private credit market continues to grow at a rapid pace, with the U.S. and European markets the largest sources of potential growth over the next three years, research by the Alternative Credit Council shows.
Total global private credit asset under management at the end of 2018 totaled $767.5 billion, completing a decade of considerable growth since the end of 2008, when there was $237.9 billion in private credit AUM, said the private credit affiliate of the alternative trade body Alternative Investment Management Association, along with law firm Dechert, in its "Financing the Economy 2019: The Future of Private Credit" report.
When asked where they expect to see their investments in private credit markets growing in the next three years, 68% of respondents to a survey on which the report is based said they expect to see their investments grow in small-to-medium enterprise/middle-market investments, 50% said distressed investments, 40% said asset-backed lending and 32% said real estate.
"We also detect greater appetite and capacity amongst managers to develop new lending strategies as an alternative or a complement to their midmarket lending strategies," the report said. "There are an increasing number of ways to lend to borrowers outside of traditional sponsored lending channels, such as 'specialist' credit strategies which require a unique approach or target a defined subset of borrowers."
When asked where they expect to invest more in the next three years, the highest response, 49%, said Europe (ex-U.K.), followed by 43% saying the U.S. and 34% saying Asia-Pacific (outside of China and India).
The report said there is evidence that borrowers in less-developed European markets are receiving more capital, and that while the volume of non-performing loans has reduced in Europe, it is still extremely high compared with other markets.
A vast majority of surveyed managers, 88%, believe that pension funds worldwide will invest more in private credit strategies over the next three years, 80% said insurers will invest more, 67% said sovereign wealth funds will invest more, while 50% or fewer said family offices, high net-worth individuals, private banks and individuals will invest more in private credit strategies.
More than one response was accepted from survey respondents.
The report is available on ACC's website. The council surveyed 60 private credit managers with combined private credit assets under management of just less than $400 billion.