The private credit market has significantly evolved over the years, marking a shift in corporate finance dynamics. Originating from an exciting wave of private equity activity, large financial entities have increasingly developed proprietary credit arms that have gained prominence. The emergence of these private credit funds, which now surpass publicly issued high-yield bonds in size, reflects a trend moving away from traditional publicly syndicated bonds and loans toward a more opaque and intricate credit landscape. This evolution indicates a need for professionals to stay informed about the changing nature of credit markets, as estimates regarding the market's size and scope vary widely, highlighting the challenges in accurately tracking its growth.
There's been a lot of talk about private credit in recent years. The market has exploded in size, and there are worries that it could be a bubble that eventually bursts and sparks disaster. But there are other negative effects from private credit that might already be happening. In a new paper called "The Credit Markets Go Dark," co-authors Harvard Law School professor Jared Ellias and Duke University School of Law professor Elisabeth de Fontenay argue that the $1.5 trillion market for private credit is already having a big impact on the economy — and not in a good way. They say that the rise of private credit marks a seismic change for corporate governance and dynamism.
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