How to Navigate Private Credit Trends

‘Peak’ Private Credit? A prominent bank CEO in the news has stated Private Credit has peaked. With the highest level of conviction, I can assure you that is simply not the case. First, some imply that Direct Lending (DL) defines Private Credit (PC), however, it is just one of the three main pillars that represent private credit. DL is currently the largest segment of PC, it is still growing, and I expect it to grow proportional to PE, a business that will undoubtably be bigger 5-10 years from now than it is today. As corporate earnings grow, the corporate sector at-large will support more debt that allows a company to add operating leverage, a reasonable assumption since corporate earnings grow with GDP and earnings are only temporarily interrupted by an occasional recession that comes along ~1x every 10 years or so. Second, Assrt-Based Lending (ABL) is only getting started. Although Marathon has been in the ABL business for 20 years, having invested $30B+, investor interest in ABL is just ramping up now. A leading consulting firms released its survey of institutional clients with ABL representing the #1 allocation request for the coming year. The TAM for ABL is enormous with some estimates providing a range of $30 to $40 trillion. In the next 5-10 years, I believe the ABL business overall will grow by 30% annually as AUM for ABL becomes as large as DL. The ABL outlook should enable PC to grow 2x on its own. Diversification and low correlation to DL, makes ABL a terrific compliment for PC investors (institutional, insurance, wealth management). The third PC leg to the stool is Opportunistic Credit, which includes capital solutions and special situations. Capital solutions provide tailored financing to meet a company’s strategic needs, ranging from growth capital and debt refinancing to solve for liquidity or restructuring through credit or hybrid structures, structured as debt, often with equity upside. The return objective for Opportunistic Credit should allow managers to generate higher IRRs than observed in DL & ABL. As DL has slowed over the past year, capital solutions have picked up rather significantly. PC also includes infrastructure debt, data centers, and more. Specialty finance such as litigation finance and NAV lending are not sectors that Marathon favors, however, they do represent a growth for PC. So, while, certain skeptics may question the growth of PC, you should have no doubt the direction of travel—the size and scope are huge and getting bigger. As the global economy grows $3 trillion per year (global GDP now exceeds $100 trillion), the amount of credit needed grows proportionally. Private Credit peaking? Not even close; that’s like saying the internet peaked in 2001 à before smartphones, cloud computing, streaming, social media, and more recently AI has helped to re-define the global economy. The Private Credit markets are ~$4T today and I believe it will grow to $10T over the next 7 years.

The Fed's shift from an aggressive tightening cycle to rate cuts is poised to reshape capital markets, with private credit positioned as a key beneficiary. Between March 2022 and September 2024, the Fed's rate hikes drove $2 trillion into money-market funds, pushing total assets to a record $7 trillion. As rates begin to decline, I, too, expect this capital to flow out of low-yield money markets and into higher-yielding assets, with private credit emerging as a prime destination for this rotation. Private credit offers attractive yields, delivering higher returns than money-market funds while remaining competitive with traditional fixed-income products. Its solid credit fundamentals, marked by consistency and resilience despite tighter spreads, continue to attract significant investor inflows. Moreover, private credit funds are capitalizing on opportunities created by banks' reduced lending activity, stepping in to facilitate new originations and refinancing deals, further solidifying their role in the financial ecosystem. Peachtree Group stands out as a leader in this space, offering investors a unique advantage. We are one of the few groups with a long-standing, proven track record in private credit. While many firms talk about credit or bring experience from banks or other organizations, few can point to 14 years of consistent execution in private credit strategy. During the Great Financial Crisis, Peachtree Group acquired and restructured loans—showcasing expertise in navigating complex credit environments. By 2011, we began direct loan originations, building a proven platform that has gone full cycle across multiple funds. Some of our earlier credit funds have been de-risked, demonstrating our ability to asset manage effectively and protect capital. We've thrived in challenging environments, including a zero-interest-rate period, and are now operating in a much more favorable interest rate landscape, positioning us for even greater success. Already benefiting from elevated yields during the tightening cycle, private credit funds are well-positioned to take advantage of renewed liquidity in the system. This influx of capital could accelerate the deployment of dry powder, enhance valuations and boost returns. With its tailored structures, private credit lenders are particularly well-suited to absorb these inflows, heightening its appeal to yield-seeking investors. While some anticipate this capital rotation may fuel an equity rally, it is more likely that the majority will flow into credit markets. For investors seeking income, stability and downside protection, private credit offers a clear advantage over the volatility of equities. https://lnkd.in/guruBvB2 Peachtree Group Peachtree Group Credit #commercialrealestate #hotels #lending #privatecredit

Hot off the press is the latest private markets quarterly update from our CIO team. Here’s what we’re seeing right now across asset classes: In #privateequity, we still like value-oriented buyouts, and specifically, managers with strong track records in operational value creation. We also recommend allocations to secondaries, as secondary exit solutions should remain a favored liquidity option and NAV discounts remain in the double digits. We continue to recommend #privatecredit, but selectivity will be key as manager dispersion is far greater here than in public credit. Spreads have tightened as competition has returned to the loan market. But we remain constructive on the sector given yields near 10%, low defaults, declining leverage, and ample covenants. Our outlook for lower growth combined with two Fed cuts in 2H25 is also supportive. In #realestate, a bottoming trend in a majority of CRE values began occurring in late 2024. We believe 2025-30 will be rewarding for investors that can identify and lean into markets benefitting from strong demographics, migratory patterns, and job creation. We believe there are opportunities emerging from properties facing financial distress that are still solid assets – which we’ve often seen in multifamily. Full report below.

KKR has released its Mid-Year Outlook for 2025, which highlights why private credit, which still presents pockets of relative value opportunities amid compressed spreads, remains a cornerstone strategy in today's "Make Your Own Luck" investment environment. 𝐓𝐡𝐞 𝐀𝐁𝐅 𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐲 As we navigate an evolving investment landscape, asset-based finance (ABF) emerges as a powerful play, according to Henry McVey and the Global Macro team. The opportunity is substantial—approaching $6 trillion today and projected to exceed $9 trillion—significantly larger than the combined high yield bond, leveraged loan, and direct lending markets. While direct lending remains important, the team’s analysis shows that collateral-based cash flows like asset-based finance offer increasingly attractive risk-adjusted returns. These investments benefit from two powerful tailwinds: inflation boosting demand for hard assets and bank de-risking creating a durable funding gap for alternative lenders to fill. 𝐌𝐚𝐤𝐢𝐧𝐠 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐀𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 2025 Europe also presents an opportunity, as issuers typically run lower leverage yet offer wider spreads than U.S. peers—effectively paying investors a premium for market complexity. As McVey and team advise: "Now is the time to climb the capital stack away from unsecured beta towards secured cash-flows that pay you for accepting complexity, not leverage." In this evolving environment where traditional portfolios face structural headwinds, private credit offers investors a meaningful way to truly "make their own luck" in the back half of 2025. https://go.kkr.com/3UfqAql

“More money in real estate” looks positive…until you read the fine print. Everyone is celebrating the surge of private credit into commercial real estate. Big names like Blackstone and BlackRock are filling the funding gap as banks step back. Less regulation. Higher leverage. More deals getting funded. It sounds great… until you realize the other side of the story. Moody’s warns that private credit loans often run at 60 to 75 percent loan-to-value, compared to banks at 50 to 65 percent. That thinner cushion means if property values keep falling, we could see defaults ripple through the system. Some say it could even echo the early stages of 2008. Here’s what investors need to watch for: 1.    Higher leverage means thinner safety margins. 2.    Many lenders have limited track records in downturns. 3.    Liquidity can vanish quickly when markets turn. And here’s how disciplined investors are protecting themselves: 1.    Favoring conservative leverage. 2.    Scrutinizing lender stability. 3.    Stress testing every deal beyond the base case. 4.    Diversifying across property types and regions. 5.    Holding more liquidity than usual. Private credit is creating opportunities today, but it could just as easily magnify the next downturn. Do you see private credit as fueling healthy growth, or setting up the market for another shock? #ThePowerOfPassiveInvesting #YourLegacyOnMainStreet

Private credit isn’t just booming, it’s basically Logan Roy in Succession trying to take over everything in sight. I’ve been flagging for a while how life insurers are charging into private credit, but this new Chicago Fed paper spells it out: 👉 Private placements doubled in a decade, hitting $849B in 2024 and are now 14% of insurer balance sheets. 👉 PE-owned insurers are the real power players, leaning into financial firms + privately placed ABS. 👉 Why? The juice! 80–150 bps more than public bonds. 👉 And the payoff? Outsized growth in indexed annuities, where higher yields translate into bigger market share. It all feels like a strategy Logan Roy would use on Succession. Use the balance sheet as “permanent capital,” squeeze out more yield, then dominate the product market. But it also leaves insurers far more entangled with the rest of the financial system. (It's giving shadow bank energy, but make it annuities.) As I’ve said before, this isn’t a side plot. This is one of the (if not the most important) main arcs in the industry right now. And this paper shows just how central insurers have become to the private credit story. What could possibly go wrong? Full read here: https://lnkd.in/eKXQSsMm

The private credit party might be getting a little too crowded... 🤔 WSJ dropped a bit of a reality check this morning: private credit managers are sitting on massive piles of cash with nowhere profitable to put it. Josh Easterly from Sixth Street put it bluntly - "people paid too much for assets between 2019 and 2022, and nobody wants to sell those assets without an acceptable return." Here's what's happening: - Private equity dealflow has slowed to a crawl (no buyouts = no lending opportunities) - Every bank, asset manager, and their cousin launched direct lending funds - Competition is crushing spreads - BDC returns dropped from 14.9% in 2021 to projected 5.2% going forward - Even Apollo's Marc Rowan is talking about "too much capital without enough opportunity" From a recruiting standpoint, this creates some interesting dynamics: The big shops are pivoting hard toward origination and "complexity" - think data center financing, consumer lending niches, and founder-owned company deals. This means they need professionals who can source and structure non-traditional transactions, not just process PE-backed deals. I'm seeing demand shift toward candidates with: - Direct origination experience (especially outside traditional PE channels) - Sector-specific expertise (healthcare, tech, infrastructure) - Complex structuring skills for "bespoke" deals The firms that figure out how to deploy capital efficiently in this environment will separate themselves from the pack. And they'll need the right talent to do it. Anyone else seeing this shift in hiring priorities? #PrivateCredit #DirectLending #TalentStrategy #MarketReality

I met a fintech founder recently, and we got to talking about the booming Private credit market. Here's where I think the alpha lies: 1️⃣ Tech-Enabled Underwriting The best private credit platforms are using AI/ML to underwrite thin-file borrowers (SMEs, startups, freelancers) at scale. Look for lenders with proprietary data moats, and manage to deliver a great user experience with slick UX. 2️⃣ While Banks remain active, the real competition is Venture Debt As VC funding stays tight, growth-stage startups are turning to revenue-based financing and ARR-backed loans. Private credit funds that blend equity upside (warrants, profit-sharing) will win. 3️⃣ Regulation is Coming (And It’s a Good Thing) Smart GPs are preemptively adopting transparency tools (blockchain settlement, real-time reporting) to attract institutional LPs ahead of the curve. We're done with chasing yield blindly. Let's instead do something about structuring tech-driven credit solutions for overlooked markets. Who’s building (or investing in) the winners? #FintechVC #PrivateCredit #AlternativeLending #IncludedVC #IncludedVCMafia Disclaimer: All opinions expressed here are my own and do not represent any firms or employers that I may be associated with.