Key Takeaways
- • Percent and Coalition Greenwich's 2023 Private Credit Market Structure Study found 63% of surveyed respondents intend to increase private credit allocations, citing expected outperformance versus U.S. government bonds and corporate bonds (70% expect), commercial real estate (62%) and residential real estate (44%).
- • Survey respondents were asset managers, hedge funds and wealth managers (family offices and RIAs), mostly managing up to $250 million in client assets.
- • Liquidity was cited by 70% of respondents as the top barrier to entry, followed by high manager fees (56%) and limited transparency relative to public markets (38%).
- • Seventy-eight percent of respondents rely on data supplied by their managers, and 57% of family offices said more accessible private credit data is needed.
- • Percent cited a Preqin estimate that the private credit market could more than double to $2.7 trillion by 2026.
Summary
Percent, a private credit platform, released findings from a study completed with Coalition Greenwich on trends in private credit investment. The study, titled "Coalition Greenwich 2023 Private Credit Market Structure Study," surveyed asset managers, hedge funds and wealth managers, including family offices and RIAs, in the U.S. The majority of respondents manage up to $250 million in assets for their clients. According to the research, 63% of respondents intend to increase private credit allocations because they expect the asset class to outperform other options, including U.S. government and corporate bonds (expected by 70%), commercial real estate (62%) and residential real estate (44%). The study supports Preqin estimates that the private credit market could more than double to $2.7 trillion by 2026.
Percent attributes the shift to a funding gap for small and mid-sized corporate borrowers, which has been intensified by 15-year high interest rates and the 2023 banking crisis. As larger banks face stricter capital requirements, asset managers, wealth managers and family offices are entering the market beyond the traditional large managers. The company says this will provide funding for small and medium-sized businesses and yields above 10% for investors. Nelson Chu, founder and CEO of Percent, said that rising rates and the banking crisis made funding difficult for smaller borrowers, and that the study reinforces trends on his firm's platform.
Survey results point to access, data and liquidity as key factors. Fifty percent of respondents had already increased allocations over the past year. Most gained exposure through funds from large asset managers, though ETFs and mutual funds were also common. Diversification was the primary investment driver (71%), and income generation ranked second (70%). Seventy percent cited liquidity as the leading barrier to entry, followed by high manager fees (56%), less transparency and regulation than public markets (38%), and difficulty sourcing opportunities (30%). Respondents said they rely heavily on manager-provided data (78%), and wealth managers favored more private credit liquid alternatives and a standardized secondary market for individual loans.
Kevin McPartland, Head of Research at Coalition Greenwich Market Structure & Technology, said private credit offers income potentially higher than public markets with a similar risk profile, and that unconventional investors are entering the asset class in unprecedented volume. Percent, founded in 2018, describes its platform as powering over $1.5 billion in transaction volume.
Percent attributes the shift to a funding gap for small and mid-sized corporate borrowers, which has been intensified by 15-year high interest rates and the 2023 banking crisis. As larger banks face stricter capital requirements, asset managers, wealth managers and family offices are entering the market beyond the traditional large managers. The company says this will provide funding for small and medium-sized businesses and yields above 10% for investors. Nelson Chu, founder and CEO of Percent, said that rising rates and the banking crisis made funding difficult for smaller borrowers, and that the study reinforces trends on his firm's platform.
Survey results point to access, data and liquidity as key factors. Fifty percent of respondents had already increased allocations over the past year. Most gained exposure through funds from large asset managers, though ETFs and mutual funds were also common. Diversification was the primary investment driver (71%), and income generation ranked second (70%). Seventy percent cited liquidity as the leading barrier to entry, followed by high manager fees (56%), less transparency and regulation than public markets (38%), and difficulty sourcing opportunities (30%). Respondents said they rely heavily on manager-provided data (78%), and wealth managers favored more private credit liquid alternatives and a standardized secondary market for individual loans.
Kevin McPartland, Head of Research at Coalition Greenwich Market Structure & Technology, said private credit offers income potentially higher than public markets with a similar risk profile, and that unconventional investors are entering the asset class in unprecedented volume. Percent, founded in 2018, describes its platform as powering over $1.5 billion in transaction volume.
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