The evolution of the private credit market presents a “compelling alternative” to traditional fixed income in the US, according to analysts at Blackstone.
In a new report, the firm said that interest rates are more likely to remain range-bound in the foreseeable future in the US as the Fed continues to reduce its balance sheet, which may “limit the upside potential of traditional fixed income”.
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“Meanwhile, the evolution of credit markets presents compelling alternatives. Private credit offers structural advantages – most notably insulation from daily public market volatility,” the report said.
“During recent bouts of market stress surrounding Liberation Day, public spreads widened to levels not seen since COVID, while private credit markets remained active and were able to provide necessary capital to borrowers.”
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It added that these assets “help mitigate interest rate risk”, while skilled underwriting provides a buffer against credit risk.
“The asset class is also expanding into high-growth sectors like energy, digital infrastructure, and transportation, with cash-flow-backed structures such as asset-backed financing.”
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