Private credit generates a 200 basis point excess spread over public markets by eliminating intermediaries. This 'farm-to-table' model connects investor capital directly to borrowers, providing customized solutions while capturing value that would otherwise be lost to syndication fees.
Contrary to a slow market narrative, deal flow has sharply accelerated. Blackstone's Michael Zwadsky revealed that August 2024 was the firm's biggest investment committee month in three years, and the summer was the third most active for M&A since 2008, signaling a real inflection point for transactions.
The next major growth wave in private credit will come from non-U.S. clients, particularly Asian insurers. These firms have only ~5% of their balance sheets in private credit, compared to 35-40% for their U.S. counterparts. Closing this gap represents a largely unpenetrated, significant opportunity.
Borrowers choose premium-priced private credit not just for speed and certainty, but for tangible value-added services. Blackstone offers portfolio-wide cross-selling, operational cost reduction support, and cybersecurity assessments, creating over $5 billion in enterprise value for its credit portfolio companies.
Blackstone’s credit decisions are deeply informed by its other business units. Owning QTS, a top data center developer, provides its credit team with proprietary insights for underwriting data center loans. This cross-platform intelligence creates a significant competitive advantage and drives better credit selection.
When evaluating software loans, Blackstone moves beyond financials to product underwriting. Its investment committee uses a specific scorecard to assess a company's risk of AI disruption, how embedded its product is in workflows, and how its technology stacks up, demonstrating a structured approach to modern threats.
A major segment of private credit isn't for LBOs, but large-scale financing for investment-grade companies against hard assets like data centers, pipelines, and aircraft. These customized, multi-billion dollar deals are often too complex or bespoke for public bond markets, creating a niche for direct lenders.