The “stability” of private credit markets versus public markets has been “amplified” by the recent spike in volatility triggered by the rollout of tariffs in the US, playing into its strengths as a “preferred partner”, according to Blue Owl’s Craig Packer, co-president and head of credit.
In the alternative asset manager’s 2025 mid-year outlook, Packer said the firm had been “witness to a number of periods where public markets pulled back significantly, demonstrating the critical role of private credit managers as liquidity providers in markets seeking reliable, solutions-oriented financing”.
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“We believe the value proposition of private credit, which has resonated with investors in relatively sanguine environments, becomes increasingly compelling when global outcomes are incrementally more uncertain,” he said.
He noted that, since April, indices have rebounded, but added that despite public markets having “stabilized”, the volatility “has not been forgotten”.
“In contrast, the comparable stability of private credit markets has only been amplified during this period,” Packer said.
He also pointed to private credit’s role in “unpredictable” markets, when “it is not surprising to see corporate and financial sponsor activity slow”, as has been the case in the first half of 2025.
“This plays to private credit’s strengths of stability and partnership, which is why it continues to grow during periods of uncertainty and to solidify its role as a critical source of financing for upper middle market companies,” Packer added.
He noted that one of the largest transformations over the past decade has been the “willingness and, in many cases, the preference of large private equity firms to utilize private loans to finance some of their largest buyouts” and that this has been a factor in the growth of private credit as an asset class.
Packer believes private credit “remains poised to continue to be the partner of choice as private equity sponsors sit on historically high levels of dry powder and buyout activity inevitably ticks up”.
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Blue Owl’s head of credit also sees “a parallel opportunity” in asset-based finance, where the increased cost of deposits, regulation, and higher capital requirements has encouraged banks to optimise their risk capital and focus on customers with whom they have direct relationships.
In turn, this has broadened the opportunity set “for asset-based credit investors with the ability to provide more flexible structures and pricing”.
Packer believes the growth of the asset-based finance opportunity set will remain “accelerated” in the coming years as private capital continues to replace bank and even public market solutions.
Read more: AllianceBernstein: Asset-based finance ‘a burgeoning market yet to be tapped’
