Private Credit Concerns in Context

The private credit market faces concerns about rapid growth, underwriting standards, and exposure to software companies potentially disrupted by AI. Alex Blostein from Goldman Sachs Research, addresses these issues, noting the market's grappling with the asset class's growth and opaqueness, underlying credit quality, and liquidity issues tied to retail products. While software exposure, particularly in direct lending, raises concerns, Blostein points out the significant subordination existing below these credits, offering a cushion against losses. Vivek Bantwal, Global Co-Head of Private Credit in Goldman Sachs Asset Management, emphasizes evaluating companies individually, noting proprietary data and critical software roles insulate companies from AI disruption. Both agree that current negative sentiment may be overblown, with potential opportunities emerging in specialized credit areas and for institutionally-focused firms.