Key Takeaways
- • Ares Management, Blackstone, and Blue Owl Capital all reported lower third-quarter lending than a year earlier across their publicly traded business development companies, according to Bloomberg.
- • Wall Street banks won a record nearly $12 billion of private lending transactions by offering cheaper pricing, limiting private credit firms' ability to deploy capital.
- • Sluggish private equity dealmaking and tighter competition are offsetting the benefit of higher interest rates for the $1.8 trillion private credit industry.
- • Private credit managers are underwriting more cautiously, responding to investor concern about exposure to software borrowers vulnerable to AI-driven disruption.
Summary
Publicly traded business development companies (BDCs) linked to major alternative asset managers are originating fewer loans, according to Bloomberg. The largest listed BDCs run by Ares Management Corp, Blackstone Inc, and Blue Owl Capital Inc each made fewer loans in the third quarter than in the same period a year earlier, even as private credit executives continue to tell investors that lending conditions remain attractive.
Higher interest rates are improving lending economics for private credit managers, but the sector has not fully converted that backdrop into new business. The slowdown reflects a combination of subdued private equity dealmaking, which has limited buyout-related financing, and stronger competition from Wall Street banks. Banks captured a record nearly $12 billion of transactions by offering lower prices, restricting the ability of private credit firms to deploy capital at the pace they would prefer.
Private credit managers also say they are taking a more cautious approach to underwriting. That restraint follows investor pushback over the industry's exposure to software borrowers seen as vulnerable to disruption from artificial intelligence.
For the $1.8 trillion private credit industry, the dynamic highlights a mismatch between favorable rate conditions and actual origination growth. While higher rates can support lender returns, subdued deal flow, tighter competition, and greater selectivity are keeping part of the market on the sidelines.
Higher interest rates are improving lending economics for private credit managers, but the sector has not fully converted that backdrop into new business. The slowdown reflects a combination of subdued private equity dealmaking, which has limited buyout-related financing, and stronger competition from Wall Street banks. Banks captured a record nearly $12 billion of transactions by offering lower prices, restricting the ability of private credit firms to deploy capital at the pace they would prefer.
Private credit managers also say they are taking a more cautious approach to underwriting. That restraint follows investor pushback over the industry's exposure to software borrowers seen as vulnerable to disruption from artificial intelligence.
For the $1.8 trillion private credit industry, the dynamic highlights a mismatch between favorable rate conditions and actual origination growth. While higher rates can support lender returns, subdued deal flow, tighter competition, and greater selectivity are keeping part of the market on the sidelines.
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