Expanding Opportunities: The Durability and Outlook of Personal Loans in Business

The 3rd Annual Private Debt Forum, hosted by CIB, brought together industry leaders and experts to discuss the evolving landscape of private credit. The forum highlighted the growth opportunities in emerging markets, particularly in Asia, as these regions establish frameworks for retirement savings and private asset investments.

One recurring theme was liquidity, especially in the context of private to public markets convergence. The panel delved into the concept of risk transfer mechanisms, discussing how alternative capital structures enable investors to manage and mitigate risks associated with illiquidity, credit defaults, and market volatility.

The private credit market is undergoing significant evolution, marked by rapid growth and increased accessibility. Michael Haize, Head of Global Markets at CIB, highlighted the growth of private debt as a significant asset class, now worth close to $2 trillion globally. The scarcity of assets has prompted discussions on the implications for capital deployment and investment strategies, especially in sectors such as direct lending.

The competitive landscape in the middle market is becoming increasingly crowded, with numerous investors vying for a limited pool of opportunities. However, the relationship between banks and asset managers has evolved towards collaboration, with banks offering lower-cost financing and asset managers bringing agility and expertise.

Europe leads in certain asset classes, such as Synthetic Risk Transfers (SRT), highlighting a difference in market maturity between the regions. The US market is predominantly transaction-driven, while the European market focuses more on relationship-building.

The panel addressed various aspects of fundraising in the private credit market, including innovative structures and the impact of regulatory changes. Structural changes in how the market is funded are connecting diverse assets with a new class of investors.

The increasing demand for private credit solutions among borrowers offers clients a means to diversify their portfolios by accessing the illiquidity risk premium. Yield and diversification were highlighted as critical factors driving the increased allocations to private credit and alternative investments.

The globalization of private credit markets means that regulatory frameworks in one region can have repercussions in others. Concerns were raised regarding potential systemic risks posed by the growing popularity of private credit. However, while regulation presents challenges, it also fosters significant opportunities for innovation.

The private credit market is projected to grow from $200 billion 25 years ago to an estimated $2.8 trillion by 2028. The potential for growth in non-corporate private credit, particularly in asset-based financing, is expected to expand in Europe. The increasing demand for private credit solutions among retail investors is becoming increasingly evident, with the need for clear communication regarding liquidity and product structures to build investor confidence.

The forum concluded with an acknowledgement of the potential for growth while recognizing the need for careful navigation of risks associated with asset valuations and changing market conditions. Ultimately, private credit is full of opportunities, but stakeholders must work collaboratively to effectively navigate the evolving landscape.

The first panel focused on the evolving dynamics between banks and alternative asset managers, moderated by Mathilde Boyez, Head of Asset Managers Coverage for EMEA at CIB. In a fireside chat, Khalid Krim and Christian Stracke discussed the evolving landscape of private credit and strategic reallocation within the space. The third and final panel of the day focused on the evolving landscape in relation to insurance companies and asset managers.

The forum was a testament to the growing importance of private credit in the global financial landscape. With experts from various backgrounds, including Frank Meijer, Global Head of Alternative Fixed Income & Structured Finance at Aegon Asset Management, and Jesus Rio Cortes, a Partner at Apollo Management International LLP, the discussions were insightful and informative.

In summary, the 3rd Annual Private Debt Forum provided a comprehensive overview of the current state and future trajectory of the private credit market. The event underscored the need for collaboration, innovation, and careful navigation of risks to capitalize on the opportunities presented by this growing asset class.