Private credit market set to exceed $30T – Blackstone

[Office building in the Marunouchi business district Tokyo, Japan]
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The private credit market has the potential to grow to more than $30T, according to Dan Leiter, head of International at Blackstone (BX [https://seekingalpha.com/symbol/BX]) Credit and Insurance.

This astronomical growth represents a massive expansion of what has traditionally been a much smaller segment of the financial markets.

In an interview with CNBC, Leiter emphasized that while private credit isn’t new, the recent acceleration in its growth has been extraordinary.

“The existing market, just for context, is about $2T in size,” Leiter said.

Private credit has expanded beyond its traditional focus on leveraged finance to include financing the real economy across infrastructure and asset-based credit. This diversification has opened up new opportunities for both borrowers and investors in a market that continues to evolve rapidly, he said.

Borrowers are increasingly drawn to private credit because of the “speed, certainty, flexibility, more customized solutions” it offers, according to Leiter.

For investors, the attraction is clear: “Investors are getting excess spread… in the context of 150 to 200 basis points of pickup, both in the high yield market or non-investment grade market, but even in the investment grade market,” he said, noting that for investment grade in particular, “that’s game changing.”

The insurance sector has become a significant player in the private credit market. “Insurance for us now is at $250B of capital with us, with Blackstone,” Leiter said, highlighting the growing institutional appetite for these investments.

He noted that insurance companies are increasingly allocating capital to private credit, with some U.S. and U.K. partners now having over 30% of their balance sheets in these investments.

Despite concerns about potential risks in this rapidly expanding market, Leiter counters that private credit may actually be safer than public credit.

“I think there’s a perception that private credit is inherently more risky than public credit. This is not the case,” he argued, pointing to performance metrics to support his view. “If you look at the performance in our actual portfolios, we’re running at half a percent default rate. The public leverage loan market is above 3% now.”