The private debt industry has undergone significant changes since the global financial crisis. Here are some ways in which the industry has evolved:
- Emergence of alternative lenders: Post-2008 regulation forced banks to retrench from the lending market, which opened the way for alternative lenders, including private debt, to fill the gap 1 .
- Growth of private debt market: The private debt market has grown tenfold in the past decade, with assets under management of funds primarily involved in direct lending 2 .
- Increased importance of private markets: The private markets have been expanding while the number of publicly- listed companies has shrunk. Private-equity backed companies have increased fivefold since 2000, while the number of publicly listed companies has decreased 3 .
- Professionalization of private debt asset management: The post-GFC exodus of credit and loan structuring talent out of prominent investment/commercial banks and financial institutions fueled the further growth and professionalization of the private debt asset management business 3 .
- Increased investor demand: Investor demand for debt funds is on the rise, as private debt offers an attractive alternative for fixed income investors who are confronting low yields, heightened market volatility, and rising interest rates 2 4 .
- Reduced transparency and liquidity: Transparency and illiquidity are key risks of the growing private debt market, as private debt loans are often less liquid than broadly syndicated loans 2 .
In summary, the private debt industry has evolved significantly since the global financial crisis, with the emergence of alternative lenders, growth of the private debt market, increased importance of private markets, professionalization of private debt asset management, increased investor demand, and reduced transparency and liquidity. Despite these changes, private debt remains an attractive alternative for investors seeking higher risk-adjusted returns and diversification.