At the beginning of 2024, spreads on new deals became smaller. The base interest rate for direct corporate loans is expected to be around 4.5% by the end of 2024, much higher than the below-1% rates after the financial crisis. These higher rates mean new loans will have higher returns, benefiting investors. While high rates are challenging, their stability and narrowing spreads should help increase deal volume.
 
Before 2008, private credit wasn’t a separate category for investing. Since then, it has grown significantly, reaching $1.6 trillion by 2023, about the size of the US high-yield bond market, with assets expected to hit $2.3 trillion by 2027, according to Preqin. Adding other forms of private credit, including commercial real estate, infrastructure, and consumer-oriented specialty finance, expands opportunities.
 
While high interest rates present challenges, the overall economic outlook is positive. Yields are expected to remain well above pre-pandemic levels, and the private credit market continues to expand. This is promising news for both lenders and investors.