The explosion of private credit investment is revolutionizing funding for mid-market businesses as institutions shift focus from traditional banks. Fenton Burgin of S&W highlights that UK pension funds and insurers are still keen on British businesses, despite government concerns. The private credit market has seen a 50% growth, projected to reach $2.6 trillion by 2029, driven by higher returns and lower volatility compared to public markets. As popularity surges, complexity in debt finance is increasing, significantly impacting borrowing conditions for businesses in the UK.
Despite the Government's worries that investors aren't backing UK Plc, it shows there's still interest in British businesses from UK pension funds and insurers.
Burgin notes that the private credit market grew by 50 per cent from 2020 to the start of 2024, highlighting its accelerating growth amidst economic volatility.
The rise of private credit has been one of the most profound changes in institutional investment in the last two decades, with huge implications for borrowers.
Direct (private) lending has delivered 150bp higher returns than comparable public bonds, appealing to institutional investors seeking higher yields.
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