While nobody can claim it to be a new phenomenon, the unrelenting growth of private capital markets has continued in 2021 with private debt now very much a mainstream credit product having been viewed with caution by many equity sponsors and shareholders as we began the exit from the great financial crisis ('GFC') in 2010. 

I recall a favourite conversation with the managing partner at a private equity firm in 2013 who claimed they would never work with a private debt fund. How times change, with that very investor now utilising the product for 90% of their investments. They chuckle about it now, but it simply highlights the speed at which private credit has been adopted in recent times. 

Some credit investors of course disagree, arguing the product has really been in development for over 20 years. This is true but it has only really exploded in the last decade and the weight of supply inevitably drives borrowers towards financing structures providing enhanced and documentary flexibility and the ability to drive equity returns through further credit deployment. According to Prequin the private capital industry has grown to exceed $7tn in the past few years and the arms race looks set to continue with direct lenders continuing to set records for new fund raises in 2021.

With European banks stepping back from loan origination since the GFC and then deluged with borrower liquidity requests during the Covid-19 pandemic its little surprise that private credit has continued to take market share. 

Don't get me wrong, we still spend considerable time sourcing funding terms from banks, where the cost of capital and leverage dynamic is matched by the opportunity, but our clients increasing ask for optionality. An ask almost always solved by the private debt alternative. With asset managers increasingly in search of deployment opportunities we also increasingly see appetite in the sponsor-less and lower mid-market as shareholders wake up to the benefits of avoiding equity dilution while still driving longer term stakeholder value. 

For those who haven't bought a ticket yet I'd advise getting to your travel agent. The private credit express has left the station and will continue to gain speed as the current decade unfolds.