panoramic skyline and buildings with many glass windows, generative ai

The Pivotal Role of Private Credit in Economic Growth

Share Article

Treabhor Mac Eochaidh, Executive Director and Head of Debt Services

Private credit continues to take center stage in the financial landscape, especially as traditional bank-arranged loan issuance has become more measured. Private credit has filled the void, providing more flexibility and becoming indispensable for economic growth. Treabhor Mac Eochaidh, Executive Director and Head of Debt Services at MUFG Investor Services, shared his insights into the versatility private credit offers as a financing source and how his team is helping clients.

Stability in Private Credit
The stability of private credit has become increasingly important as traditional banks and lenders have pulled back. With a growing amount of dry powder available for lending, private credit offers more than conventional financing sources and continues to help drive economic growth. Data from Preqin shows a 6% increase in private credit dry powder, from $412.2bn in December 2022 to $438.1bn as of June 2023 highlighting investor interest in the asset class. (Preqin, 2023) This growth is propelled by the flexibility that private credit offers to lenders and borrowers, appealing to various stakeholders across different economic sectors. With a growing amount of dry powder available for lending, private credit offers more opportunities than conventional financing sources.

Stability in private credit is achieved through stringent assessment processes. This stability is critical as it offers reassurance to investors and fosters a sustainable financial ecosystem. With unparalleled flexibility compared to conventional financing sources, Private credit allows businesses and investors to explore innovative financing models, offering diversification and attractive returns. Various enterprises and economic sectors leverage the benefits of private credit to foster growth and innovation.

Simplify The Complexities of The Loan Market
Mac Eochaidh emphasized the importance of meticulously managing debt portfolios to tackle the inefficiencies of the loan market with a trusted partner with a deep understanding of the complexities of various types of loans. Clients also need the proper guidance and counsel to help them comply with evolving regulatory demands and maintain operational excellence. With MUFG Investor Services clients optimize their operational efficiency and mitigate potential risks with flexible solutions that meet the unique needs of their portfolio, ranging from fund administration, loan administration, loan closing, loan servicing and collateralized loan obligations (CLOs) administration, to drive growth and empower them to navigate the unique intricacies of the lending asset class with confidence.

The Evolution
Private credit has established itself as a mature market in its own right over the last decade, solidifying its status as a linchpin in economic growth. Its increasing stability and flexibility have made it an attractive alternative to conventional financing sources, driving innovation and expanding opportunities across various sectors. However, the road ahead demands constant vigilance to mitigate risks and address concerns related to its stability. The trajectory of private credit is indicative of its potential to reshape the financial landscape and propel economic growth, emphasizing the need for balanced and informed approaches to harness its full potential.

This article was originally published in The Alternative Investor. Access the full October edition of The Alternative Investor by clicking here.