Wealth and Asset Managers Focus on Private Credit

Interest rates at a 15-year high and the mini bank crisis of March 2023 have been a double whammy for small and midsize corporate borrowers, making it expensive and sometimes impossible for them to get the funding they need to expand or survive. Even the largest borrowers, corporates and private equity firms looking to finance buyouts, are now working harder to secure the credit they need, as top-tier banks are facing increasingly stringent capital requirements.

Enter private credit. Nonbanks providing financing outside of the traditional banking system are certainly nothing new, but the aforementioned headwinds to the public credit markets, coupled with increased investor appetite for yields that often top 10%, have seen the private credit market grow to $1.3 trillion at the end of 2022,¹ with estimates suggesting the market could more than double to $2.7 trillion by 2026.²

Large asset managers such as Apollo, KKR and Blackstone account for the majority of private credit assets under management (AUM), but it is the long tail of investors—boutique asset managers, wealth managers and family offices—that are increasingly entering the market and acting as the source of funds for small and medium-sized businesses around the world.

Coalition Greenwich conducted 77 interviews in the summer of 2023 with asset managers, hedge funds and wealth managers (both family offices and RIAs) in the United States to better understand their participation in the private credit market and expectations for the future. The majority of respondents managed $250 million or less in assets for their clients.