Ares Management, BC Partners, KKR & Co, and Medalist Partners are among the private credit firms that are raising billions of dollars to secure a share of a $5.2tn market that includes US consumer debt, according to a report by Bloomberg.
With providers of auto and consumer loans finding traditional funding sources such as regional banks more difficult to access, private credit firms have identified an opportunity to both increase investor returns and add an alternative to the increasingly competitive corporate loans market to their offerings.
The report quotes Evan Carruthers, co-chief executive officer at asset-based private lender Castlelake, as saying that: “Institutional funds may not want to increase their exposure to venture debt or corporate buyouts in an uncertain macroeconomic environment, but we believe they view asset-based private credit as offering similar returns to corporate debt with potentially less risk.”
According to Bloomberg, direct lenders are already deploying some of the money raised to buy consumer loan portfolios from regional banks, including California-based PacWest Bancorp and Georgia’s Synovus Bank, with KKR, Varde Partners among those buying the debt.
