Private credit under the hood: Separating headlines from fundamentals

Headlines about private credit ‘cockroaches’ and Business Development Company investors running for the hills are a regular occurrence. Just how worried should we be about this burgeoning part of the credit landscape? In this piece, we focus on the relationship between the traditional financial sector (banks and insurers) and ‘private credit’ in the US. What we mean by private credit here is direct lending to US middle market companies (the term can be used more broadly to include, for example, investment grade lending). We argue that private credit is best understood...