Private credit has become an increasingly important asset class for institutional investors looking for yield in a low interest rate environment. Major private credit investment companies manage billions in capital and offer lending solutions to mid-market companies. In this article, we will look at some of the major players in private credit and key facts about this growing industry.
Top 5 private credit managers by AUM
According to Preqin data, the top 5 private credit managers globally by assets under management (AUM) are: 1. Ares Management – $137 billion in private credit AUM. Ares operates across several private credit strategies including direct lending, structured credit, and special situations. 2. KKR – $75 billion in private credit AUM. KKR has been active in private credit since 2004 and focuses on middle-market direct lending. 3. Blackstone – $64 billion in private credit AUM. Blackstone’s credit platform includes mezzanine lending, senior debt, distressed credit, and structured products. 4. Apollo Global Management – $58 billion in private credit AUM. Apollo is a leading investor across corporate, real estate, and structured credit. 5. Oaktree Capital – $53 billion in private credit AUM. Oaktree specializes in below investment grade corporate debt and has expertise in distressed and stressed credit.
Private credit penetration of institutional portfolios
According to Preqin’s 2020 global private debt report, the median private credit allocation is 4% of institutional investors’ portfolios. However, this share is expected to increase over the next 5 years. Nearly 40% of investors expect to increase private credit allocations, while less than 5% expect decreases. Investors planning increases expect to boost private credit allocations to 7% by 2025. Growing private credit allocations reflect investor demand for non-investment grade credit and stable yields not available in liquid credit markets.
Focus on direct lending strategies
Within private credit, direct lending has emerged as a major strategy. Direct lending entails providing financing directly to mid-market companies, bypassing traditional bank lending. According to Refinitiv LPC data, assets under management in direct lending reached $118 billion in 2020, a 13% increase over 2019. Direct lending is popular among institutional investors due to its floating rate coupons that provide insulation from rising rates.
Private credit market projected to top $1 trillion
The growth trajectory of private credit is expected to continue. Preqin projects private credit assets under management will reach $1.2 trillion by 2025, nearly double the $684 billion in 2020. The expansion will be driven by rising allocations from pension funds, insurers, family offices and other institutional investors. Managers are also launching private credit funds at a rapid clip, with over 150 raised in 2020.
Private credit is rapidly becoming an essential component of institutional portfolios due to its high relative yields. Major private credit managers hold over $350 billion in AUM, providing financing for mid-market corporates shut out from liquid credit markets. Investor allocations are projected to continue rising as private credit further penetrates the institutional landscape.