Second-half jitters

Ever since private credit emerged, there have been doubters who are not convinced that it will stand the test of time. Here’s a small sample of those doubts: 

When the going gets tough, lenders will find they are not adequately staffed or resourced; the companies that direct lenders finance are generally smaller and therefore will be hit harder in a recession; the market’s opacity enables bad behavior that will be harmful in the long run.

Despite these reservations, private equity sponsors and institutional investors alike have steadily been won over, and the market has only grown. The exuberance that has helped private credit reach $1.5trn in size is unlikely to evaporate overnight. 

Nevertheless, in recent weeks there has been a spate of warnings about the second half of the year.