Key Takeaways
- • Global private credit assets under management reached approximately $3.5 trillion at the end of 2024, with managers deploying a record $592.8 billion across strategies during the year, according to FTI Consulting.
- • New direct lending volume has moderated from recent highs, spreads between direct lending and broadly syndicated loans have narrowed, and investors are becoming more selective, per the article.
- • FTI Consulting argues that managers should shift focus from origination to portfolio intelligence, keeping the original underwriting thesis as a living monitoring framework throughout the hold period.
- • Loan portfolio acquisitions are growing, requiring managers to assess and price credits they did not originate, with regulators and LPs demanding more rigorous valuation and performance measurement.
- • Firms building stronger portfolio intelligence capabilities are moving beyond quarterly financials and covenant tests toward independent valuation views, operational insight into individual credits, and portfolio-level stress testing.
Summary
According to a commentary published by FTI Consulting, private credit's growth era was defined largely by origination, meaning deal flow, execution speed and deal structuring. The article notes that global private credit assets under management reached approximately $3.5 trillion at the end of 2024, with managers deploying a record $592.8 billion across strategies that year. The author states that new direct lending volume has moderated from recent highs, spreads between direct lending and broadly syndicated loans have narrowed, and investors are becoming more selective about where capital is allocated. Loan portfolio acquisitions are also becoming more common, requiring managers to assess and price credits they did not originate. Regulators and limited partners are increasingly questioning how portfolios are valued and how performance is measured.
FTI Consulting contends that the next phase of the asset class will centre on portfolio intelligence rather than origination alone. The article argues that a portfolio built over a decade of deal activity must now be actively managed, and that tools effective during deployment are not always suitable for oversight. Managers acquiring loan portfolios face a more immediate challenge, often working with less context, compressed timelines and limited direct borrower history.
A central recommendation is that the underwriting thesis should remain a living reference rather than a closing document. The author notes that oversight often degrades into periodic financial reporting and covenant monitoring after closing, leaving managers to rebuild their understanding of a borrower over time. The firm recommends continuing to test the original thesis against performance, including whether growth is tracking expectations, which operational factors matter most, and which early indicators could signal a shift in credit quality.
The article also emphasises that effective oversight requires independent valuation views that withstand LP and regulatory scrutiny, operational insight sufficient to distinguish temporary weakness from structural problems, and portfolio-level stress testing using assumptions owned by the manager rather than legacy underwriting assumptions from a different rate environment. FTI Consulting concludes that firms able to generate insight from increasingly complex portfolios are likely to differentiate themselves, and that such capabilities support valuation integrity and LP confidence in future fundraising. The views are those of the author(s) and not necessarily those of FTI Consulting, Inc.
FTI Consulting contends that the next phase of the asset class will centre on portfolio intelligence rather than origination alone. The article argues that a portfolio built over a decade of deal activity must now be actively managed, and that tools effective during deployment are not always suitable for oversight. Managers acquiring loan portfolios face a more immediate challenge, often working with less context, compressed timelines and limited direct borrower history.
A central recommendation is that the underwriting thesis should remain a living reference rather than a closing document. The author notes that oversight often degrades into periodic financial reporting and covenant monitoring after closing, leaving managers to rebuild their understanding of a borrower over time. The firm recommends continuing to test the original thesis against performance, including whether growth is tracking expectations, which operational factors matter most, and which early indicators could signal a shift in credit quality.
The article also emphasises that effective oversight requires independent valuation views that withstand LP and regulatory scrutiny, operational insight sufficient to distinguish temporary weakness from structural problems, and portfolio-level stress testing using assumptions owned by the manager rather than legacy underwriting assumptions from a different rate environment. FTI Consulting concludes that firms able to generate insight from increasingly complex portfolios are likely to differentiate themselves, and that such capabilities support valuation integrity and LP confidence in future fundraising. The views are those of the author(s) and not necessarily those of FTI Consulting, Inc.
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