Chart of the week Archives

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Private credit is a small fraction of the U.S. credit market

In contrast to the headlines, the primary story in private credit is the change in market share, not the change in market size.

$Column chart showing major corporate credit markets by size. The chart highlights how small the private credit market remains, despite it accounting for outsized press over the past year. Private credit represents approximately $1.25 trillion in the U.S. and $2 trillion globally, which represents a fraction of the investment grade ($9 trillion) and bank loan ($11 trillion) markets.$

U.S. middle market shows notably strong top-line growth

Private middle market firms continue to power the U.S. economy, driving higher revenue growth than that of small and large cap firms.

Column chart showing trailing 12-month revenue growth of constituents of the Russell 2000 Index (1.6%), the S&P 500 (6.2%) and the private U.S. middle market (12.9%). The strong revenue outperformance of private middle market firms speaks to the fundamental health of these companies relative to public small- and large-cap firms.

Private credit yields remain attractive despite Fed rate cuts

Real yields on private credit could remain in their top historical quartile even if the Fed cuts another 75 basis points as markets expect.

Line chart showing private credit real (inflation adjusted) yield and forecasted real yield based on the market-implied forecast of the Fed funds rate through December 2025. Even if the Fed reduces rates by another 75bps by December 2025 as the market currently expects, a private credit real yield of approximately 7.7% would be higher than in 80% of cases throughout the market’s history.

Direct lending volume grows amid increased LBO activity

Private credit has increasingly become the preferred source of financing for PE sponsors, with direct lending volume jumping 60% over last year’s level.