The private credit market can be expected to double in growth over the next five years, according to Michael Arougheti, Co-Founder, CEO and President at $429bn global alternative investment manager Ares Management.
Speaking on a credit opportunities panel at the SALT iConnections conference in New York on Tuesday, Arougheti highlighted a 10-year compound annual growth rate for the private credit markets of approximately 15%. He added that about 75% of Ares’ investments are in some form of credit instruments.
Another panellist, Daniel S Loeb, CEO at $10.4bn hedge fund Third Point, described the current environment as “a bond and credit pickers market”, noting that while distressed opportunities have been less consistent, there are numerous stressed opportunities to consider. Third Point plans to launch a private credit fund later this year.
Arougheti also emphasised opportunities ahead of an ongoing balance sheet cleanup: “There are liquidity induced cracks that have already emerged as rates stay higher for longer. That will continue.
“So I don’t want to give anybody the impression that there’s not opportunities to invest because of rates.”
Ty Wallach, Managing Director and CIO of credit at $1.3bn global investment firm Atlas Merchant Capital, noted that higher interest rates have resulted in good companies with bad balance sheets. He mentioned opportunities in the $2bn-and-below space, as capital chases large deals and smaller middle-market companies are left behind in need of capital.
As with his fellow panellists, Wallach anticipated further growth for private markets, pointing out that “so much of the capital being raised is for private markets” and highlighting the development of the secondaries market in private credit.
