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17/07/2024

Private Credit

What is private credit?

Private credit consists of non-bank loans where debt is neither issued nor traded in the public markets.

  • 1,7trillion dollars

    Size of the global private credit market including effective issuance and dry powder

    Source: Blackrock and own calculations. Data as of June 2023.

  • 17%CAGR*

    Market size growth expected between 2023 and 2028
     * CAGR: Compound Annual Growth Rate. Source: Blackrock and own calculations. Data as of June 2023.

  • 10x

    Private Equity inflows vs. private credit inflows over the last decade
    Source: Preqin, as of September 2022.

Private credit has rapidly evolved from being a niche financing option to a significant and institutionalized asset class, driven primarily by regulatory changes and investor preferences.

Origins of private credit

Private Credit - Santander Private Banking

The evolution of private credit has been marked by significant changes in market dynamics, the regulatory landscape and investor behavior. 

Assets under management have quadrupled since the end of the GCF, reaching an estimated $1.7 trillion by the end of 2023 and private credit is expected to exceed $3.5 trillion by 2028 as a result of bank disintermediation.

An attractive investment option 

Private Credit - Santander Private Banking
  1. It can offer yields between 3% and 6% higher than that of lower credit quality bonds (high yield) and syndicated loans.
  2. It allows access to a range of sectors and companies that are not in the public markets.
  3. Tends to have lower volatility compared to public market securities due to less frequent pricing and trading. 
  • Profitability - Santander Private Banking

    Higher profitability than listed options

  • Diversification - Santander Private Banking

    Diversification

  • Private Credit - Santander Private Banking

    Lower volatility and loss ratios

Why now?

European Prymary - Santander Private Banking

1. Change of financing model after the GFC

Since the Great Financial Crisis, private credit has been gaining share over syndicated loans.

High-yield - Santander Private Banking

2. Refinancing needs

Maturities of U.S. high-yield credit and leveraged loans between 2025 and 2028 is approximately $1.5 trillion, which may create new financing opportunities via private credit.

Capital funds - Santander Private Banking

3. Mismatch between supply and demand

The size of private equity funds has been increasing, which allows them to access transactions with larger companies. We would expect demand for credit to increase substantially.

The importance of selecting the right manager

  • 1

    Due to the specialized skill set and infrastructure required to invest in private markets, the return obtained by managers varies considerably.

  • 2

    The difference between the top and bottom quartile in private markets is much larger than in other asset classes.

  • 3

    Manager selection is a critical component of private credit investment.

Santander Private Banking is a leading global partner leader in alternative investments

Experienced managers - Santander Private Banking
Experienced managers
Structures adapted to each geography to each geography  - Santander Private Banking
Structures adapted to each geography to each geography
Client Focus - Santander Private Banking
Co-investing with Santander
Specialized team - Santander Private Banking
Dedicated and experienced team

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