An expanding asset class
At its most basic level, private credit is simply a financing activity that occurs directly between a lender and borrower, without the intermediation of public markets. While private credit has long existed, its role in portfolios has evolved.
“If you just think of private credit as sub-investment grade leveraged lending, you’re missing the majority of the opportunity set that’s developing,” says Apollo’s Vanek. “We see the most growth in the high-grade or investment grade space where companies are evolving and thinking through the specific types of financing they want to structure working directly with the lender.”
Vanek also points to dramatic growth in private asset-backed financing, and not just in traditional areas like commercial and residential real estate. The value of total direct private lending is now around $1.7 trillion, but when you add in the value of these emerging asset-backed vehicles and investment grade financing opportunities, Apollo estimates it tops $40 trillion.
“When you look at the private direct lending market, really the only thing that defines it as private nowadays is the source of capital,” says Bloomberg’s Foster. “It’s everything from investment grade AA down to levered equity and venture capital and everything in between.”
Blurring the lines between public and private debt
Private credit originally sprang up to fill a gap after regulatory reform pushed banks out of certain kinds of lending, but now the banks are returning.
As a result, private credit is evolving beyond its origins as a single lender and single borrower market. Similar to loan syndicates, deals are now increasingly financed by larger clubs of lenders and sometimes tap both private and bank capital. Even investment-grade issuers who have access to public markets are increasingly seeking private financing. New vehicles like private credit ETFs and interval funds targeted at wealthy individuals have broadened the universe of potential investors to include retail.
A shifting regulatory environment
As private credit assumes a larger role in global finance and draws interest from new investor groups such as retail and pension funds, firms are growing increasingly attuned to the need to prepare for potential regulatory scrutiny and compliance requirements.
“For private credit, a lot of our clients felt like there’s a lot they needed to focus on, but they were spread too thin,” says McDermott Will & Schulte’s Koscuiszka. “What we really expect is now there’s going to be a back-to-basics with private credit, with a focus on disclosures, valuation, and AI.”
Incorporating AI
Private credit experts believe that AI’s impact will be particularly transformative.
Part of the difficulty—and the opportunity—comes from the amount and type of data that private credit transactions generate. Bloomberg’s Foster explains, “A lot of the deal documentation that comes to our customers is completely unstructured and to date has required substantial manual effort to pull out key information. These include credit agreements, confidential information memorandums, term sheets, and financials, just vast amounts of data.”
Apollo is exploring ways to use AI to mine its own store of decades of proprietary data on private credit transactions. Vanek explains, “Being able to harness that data would be incredibly powerful, not just for us, but also for our constituents and investors.”
Koscuiszka adds that, as a highly regulated industry, Wall Street has had to be deliberate about incorporating AI, which may help it minimize the problems that have plagued other businesses. As private credit moves forward to adopt these tools, she says compliance will have an important seat at the table. She adds, “Even though AI is not specific to private credit, it’s touching everything. There’s no way to do something in a compliant manner these days without thinking about how you are using AI.”
Beyond AI, increased regulatory attention – driven in part by broader investor participation – is expected to accelerate the push for more frequent, more standardized reporting and consistent identifiers. These shifts will help align private and public markets more closely. Tools like FIGI (Financial Instrument Global Identifier) could support this convergence, enabling asset managers and asset owners to more easily identify and evaluate private credit opportunities alongside traditional IG and HY bonds.
Challenges and opportunities
Even as private credit wrestles with these challenges, its prospects remain strong. Vanek stated, “Credit has had strong appeal as an asset class since the global financial crisis. Right now, there are a lot of attractive opportunities to finance businesses where the old methods don’t really work anymore, which is why you’re seeing private credit opportunities rise.”
As private credit reshapes how capital is raised and deployed, the need for transparency, efficiency, and actionable data is more critical than ever. In his closing comments, Foster reinforced Bloomberg’s commitment to private markets, underscoring bold and lasting investments designed to match the scale of client demand. As private assets take on an ever-greater role in global portfolios, the firm is bringing the same rigor, transparency, and innovation that have long defined its leadership in public markets. Bloomberg is expanding its data, technology, and analytics to deliver the consistency and insight clients need, breaking down the barriers between public and private markets. The investment is significant, with a clear goal: to help clients unlock opportunity and manage risk with confidence in private markets.
