The private credit boom is going to trigger a new “squeeze” that will worst affect middle-sized asset managers, according to a report by Financial Times.
While the private credit market is booming, it is likely to increase competition within the sector, according to the report. The report noted that the market is expected to grow from $1.6tn this year to $2.8tn, quoting Marc Rowan, chief executive of private capital firm Apollo as saying that “Debanking” was in its early stage.
The report notes that the way the market develops is yet to be seen, and while some investors would prefer passive and exchange traded funds, other investors seeking higher returns would allocate to specialist fund managers investing in private assets, hedge funds and real estate.
However, this would mean that core fund managers, would need to become more specialised, or merge for scale. Firms with specific specialisations such as energy infrastructure lending and distressed debt may be spared the squeeze, the report adds.