Private Credit: A growing market with growing risks
Private credit, a fast-growing and highly opaque US lending segment, is driving up leverage in the financial system and concentrating economic activity within a small group of asset managers, with systemic risk. 
  • SUMMARY
  • REPORTS

  • 28 Jun 2022|Moody's Investors Service
    Growing appetite for the yield, convenience and plentiful capital of private credit alternatives will continue to expand this opaque market, in which weakening performance may go undetected before it disrupts the capital markets and economy.   

    Sector In-Depth
    23 Jun 2022|Moody's Investors Service

    With disintermediation risk rising, some banks have found opportunity in capital call lending, which has a very strong track record for asset quality. But as more banks enter the space and competition heats up, risk taking will likely rise too.


    Sector In-Depth
    13 Jun 2022|Moody's Investors Service
    Rising interest rates will improve US business development companies' (BDCs) profitability, a credit positive that will help offset a moderate rise in asset risk in our base case, though the possibility of a downside scenario is rising.

    Sector In-Depth
    13 Jun 2022|Moody's Investors Service
    The growing amount of funding that non-bank lenders provide to corporations supports business expansion across the US economy, but it also helps drive rising corporate leverage and increases opaque risk in the financial system.

    Sector In-Depth
    06 Jun 2022|Moody's Investors Service
    Asset managers find significant opportunities in the rapidly expanding private credit market, adding to assets under management scale and diversity and enlarging their influence in the US middle market. However, rising leverage, concentration of lending in certain industries and the opacity of the still-young private credit market have also increased potential systemic risks.

    Sector In-Depth
    23 May 2022|Moody's Investors Service
    Both public pension funds and insurance companies have aggressively invested in private equity and private credit in search of returns, and, in the case of public pension funds, to reduce state and local governments’ reported liabilities. However, public pension funds have increased their investment risk to a level that exceeds that of insurance companies, which instead have altered products and pricing rather than rely heavily on risky private assets.

    Sector In-Depth
    16 May 2022|Moody's Investors Service
    US high-yield bond and loan issuance has fallen sharply since Russia’s invasion of Ukraine, as investors turn more risk averse. While private credit lenders have an increasingly important funding role for leveraged middle market companies, the relationship with their private equity-backed portfolio companies is less transparent. Better terms among private credit lenders can also mask underlying risk.

    Sector In-Depth
    04 May 2022|Moody's Investors Service
    The growth of private credit has transformed a formerly niche market into one with much broader lending capacity that fuels M&A and refinancing growth opportunities for companies across the US economy. But as private credit has expanded, so too have the risks in a highly interconnected and deeply opaque market, with potential to cause cascading disruptions across the capital markets.

    03 May 2022|Moody's Investors Service
    The rapid growth of private credit is concentrating a large amount of assets with a small number of alternative asset managers.  It’s an opaque, highly leveraged and lightly regulated market, in which a broad deterioration in credit quality has the potential to cause cascading disruptions across the capital markets and broader economy.

    27 Apr 2022|Moody's Investors Service
    Ana Arsov of the financial institutions team explains how private credit, a fast-growing and highly opaque US lending segment, is driving up leverage in the financial system and concentrating economic activity within a small group of asset managers, with systemic risk.