What makes something “private credit,” as opposed to, uh, public credit?
I write a lot about private credit, and I talk sometimes with people running private credit at big asset managers, and this is very embarrassing, but I don’t know what private credit is?
What makes something “private credit,” as opposed to, uh, public credit?
Here is my best approximation of an answer
In public credit — the common terms are “the bond market” and “the syndicated loan market”
In private credit, a company wants to borrow money, so it deals with some intermediary who already has the money.
You want to borrow money, so you go to an asset manager — Blackstone or Ares or Apollo or Blue Owl or whoever — and say “can I borrow money,” and they say “sure, here you go.”
They just write you a check.
But even in private credit, you deal with an intermediary.
The asset managers are not principals; they don’t just have money; the Apollo partner negotiating a deal with you isn’t just lending you money from her personal account.
The asset managers have control over their clients’ money: When they say “okay we’ll lend you the money,” you are confident that they can actually get the money, but they get it from their clients.
Private credit does not trade: Private credit funds make loans and then hold them to maturity.
But it is incredibly unstable. Things happen; stuff wants to trade.
If a private credit fund makes a loan, planning to hold it to maturity and build a long-term relationship, and then the market changes, it might want to sell the loan. Someone might want to buy it.
The idea that every private credit loan would be held to maturity just does not seem all that plausible.
Matt Levine Bloomberg 5 February 2025
https://www.bloomberg.com/opinion/articles/2025-02-05/private-credit-is-the-new-public-credit
The private credit market $1.5 trillion
Tip of Debt Iceberg
https://englundmacro.blogspot.com/2023/05/the-private-credit-market-15-trillion.html
Tillbaka till Rolfs länktips 7 Februari 2025
https://englundmacro.blogspot.com/2025/02/rolfs-lanktips-7-februari-2025.html
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