How Private Credit Became One of the Hottest Investments on Wall Street
Private credit has quickly become one of Wall Street’s most popular investment classes in 2023. Alternative data platform Preqin projects this asset class will reach $2.7 trillion by 2027.
Several firms like Apollo Global and Ares Management have grown this market from just $250 billion in 2010.
This happened in part due to banks retrenching from the lending market after the Great Financial Crisis in 2008 with new regulations. It also has roots in the Federal Reserve’s monetary policy of holding interest rates near 0% for a decade.
"We had a banking crisis in this country [and] the Fed drove interest rates to zero," said Lafayette Capital founder Damien Dwin. "That’s created conditions where alternative investments could flourish, because of the additional yield that can be delivered."
However, this asset class is not without risk and not easily investable. You won’t find private credit funds on Robinhood.
"It comes from pension funds, endowments and foundations, insurance companies, retail investors sovereign wealth investors," Dwin said. "So it is loans from a source other than deposits, usually to privately held businesses."
Watch the video above to learn more about what private credit is, how it has changed debt markets, and the risks involved.
0:00 — Intro
1:34 — What is private credit?
4:24 — Why private credit is booming
7:17 — Risks to the financial system
9:08 — What’s next?
» Subscribe to CNBC: https://cnb.cx/SubscribeCNBC
» Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision
» Subscribe to CNBC Classic: https://cnb.cx/SubscribeCNBCclassic
About CNBC: From ‘Wall Street’ to ‘Main Street’ to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more.
Connect with CNBC News Online
Get the latest news: https://www.cnbc.com/
Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC
Follow CNBC News on Facebook: https://cnb.cx/LikeCNBC
Follow CNBC News on Twitter: https://cnb.cx/FollowCNBC
Follow CNBC News on Instagram: https://cnb.cx/InstagramCNBC
Subscribe to CNBC PRO: https://cnb.cx/2NLi9AN
#CNBC
How Private Credit Became One of the Hottest Investments on Wall Street
