Private Credit Boom May Surge to $15 Trillion, Marathon CEO Says

The private-credit universe — already one of the fastest-growing markets — has room to balloon to $15 trillion over the next decade from $1.7 trillion today as types of lending broaden and expand, said Bruce Richards, whose Marathon Asset Management invests in a multitude of credit markets.

“It’s going to be $15 trillion, that same sector in the next eight to 10 years, which is a really big number,” Richards said Thursday at an event at New York University’s Stern School of Business. 

Private credit has taken off in recent years, filling a gap as banks stepped back from some risky lending amid tightening regulations. Growth in the industry has accelerating amid strong demand from investors including pension funds, endowments and insurers. 

Richards — who is chief executive officer at Marathon, with about $23 billion under management — estimates the market’s true size today may be closer to $3 trillion when leverage is taken into account.

Meanwhile, with asset-backed lending becoming a greater part of the private credit playbook, that subsector could grow as much as 40% a year to become a $6 trillion market, he said. It will be “as big as direct lending when you project out a few years from now,” said Richards. When so-called LME trades are taken into account — or liability management exercises, where struggling companies seek creative financing arrangements to fix existing debt loads— that makes the market opportunity even bigger, he said.

Richards isn’t alone in highlighting a private credit market that’s likely much larger than currently assumed. Apollo Global Management Inc. Chief Executive Officer Marc Rowan has said the total addressable market is about $40 trillion, and that most of the market is not leveraged loans. 

“Non-traded – or ‘private’ – corporate and consumer credit can be found on the balance sheets of banks as well as insurers, asset managers, pensions and many others in the investor marketplace,” Apollo describes in a presentation. They cite opportunities across a multitude of lending types, like residential mortgages, auto loans and equipment financing. 

Richards said new banking rules that will take effect under the Basel III Endgame regime will be “the propeller that drives” asset-backed lending, because traditional lenders might further step back from certain types of loans. He cited opportunities among a “rainbow of different assets” like aircraft leasing, shipping finance and music royalties. 

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