The growth of the private credit market has been a success story for the industry and helped support the real economy at a time when bank lending has become partially constrained by regulation introduced following the global financial crises. It was also supported by lower interest rates, resulting in investors seeking more attractive returns.
This growth has further intensified regulatory scrutiny of the industry, which is likely to accelerate following recent market events.
Investors as well as risk and compliance functions within private asset managers are adjusting their perspectives on private credit and increasingly viewing it as one of the riskiest asset classes within the range of private assets under management.
Recent bankruptcies have prompted private credit managers and banks to consider where they may need to tighten up internal arrangements — particularly in the context of invoice and trade finance.