Friends Not Foes

Summary

• Private and liquid credit markets function as complementary asset classes with over $1.7 trillion in corporate private debt assets as of March 2025.
• Private credit growth accelerated in 2021-22 following bank retrenchment after the 2008 crisis and funding gaps created by the pandemic.
• Direct lending and broadly syndicated loan markets reached parity in refinancing activity in 2025, with roughly $25 billion of loans moving in each direction.
• Liquid credit offers tradability and regular pricing, while private credit provides yield premiums and dampened volatility due to fundamental rather than market-based pricing.
• Blending private and liquid credit allows investors to access a broader mix of company sizes, sectors, and geographies.
• Diversification opportunities include asset-backed finance, sectoral niches like life sciences, CLOs, and real estate debt.
• Convertible bond issuance reached nearly $30 billion in September 2025, with total year-to-date issuance exceeding $125 billion.
• European credit markets saw record high yield issuance in Q3 2025, with refinancings comprising nearly 70% of total volume.
• CCC-rated loans trade at spreads exceeding 1,200 basis points, significantly higher than the historical average for B- and BB-rated loans.
• Investment grade corporate bonds returned 2.7% in Q3 2025 with $409.0 billion in issuance.
• U.S. high yield bonds returned 2.4% in Q3 2025 with 1.4% defaults over the last twelve months.
• Senior loans returned 1.7% in the U.S. and 0.9% in Europe during Q3 2025.
• Emerging markets high yield debt returned 3.4% in Q3 2025 with 3.3% defaults over the last twelve months.
• Global convertibles returned 7.1% in Q3 2025 with $54.4 billion in issuance.
• BB-rated U.S. CLOs returned 3.4% while BBB-rated U.S. CLOs returned 2.2% in Q3 2025.