Private credit comes front and center

Tuesday, Sep 13th 2022


Wall Street banks are being outhustled

Titan’s Takeaway: After ceding power to alternative asset managers, banks are clamoring to get back into one private credit and direct lending after it evolved into a trillion-dollar powerhouse. Meanwhile, investor demand continues to fuel the growth of the burgeoning asset class, officially stamping direct lending as a core part of the financial ecosystem. 

Wall Street banks may still have the brand recognition, but they are getting out-hustled in at least one area of global capital markets: private credit. Banks that moved on from lending to middle market companies following the 2008 financial crisis are now attempting to regain ground after ceding power to alternative asset managers such as Carlyle, Blackstone, and Apollo.

As banks refocused their efforts on investment banking and consumer divisions, the void allowed these large asset managers the ability to lend directly to companies - circumventing the investment banks while benefiting from the higher yield that private credit may provide.

The returns have remained steady, demand has continued to grow and the industry has ballooned to over $1 trillion of assets as a result. The inflow of capital chasing competitive yield has allowed managers to service multi-billion dollar loans, the kinds of transactions typically would kill to run. 

Competition from Wall street’s biggest banks is looming, but alternative asset managers still have two key advantages: speed and flexibility. Asset managers like Carlyle can quickly facilitate a loan for a company with lower levels of red tape while meeting the company where they are in an effort to provide the most advantageous and flexible terms possible. 

Once a sector abandoned for its regulatory headache and meager impact to banks’ bottom lines, direct lending has evolved into a trillion-dollar powerhouse. Investor demand is fueling the growth of private credit as it continues to serve a meaningful place in a long-term investor’s tool kit.

We’re excited that many Titan clients can now allocate capital to this burgeoning asset class.

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