Is Private Credit Emerging as the New Billionaire Churning Factory of Finance World?
Private credit is an under-regulated, high-yielding lending niche that is creating the new billionaires. Private credit are loans or credit instruments privately negotiated between borrowers and non-bank lenders, bypassing traditional banking systems. Such loans are not publicly listed and are tailored to the unique requirements of borrowers, who are typically middle-market businesses or PE backed firms
The above group of 18 men (all males), have become billionaires in the last decade. Sixteen of them are aged 50-70 years, Thirteen attended Ivy League schools and Five attended Public Universities. Almost all have their roots planted in the 1980s and 1990s – the years that saw the rise of junk bonds. Many of them after having worked for large investment banks, formed their own leverage buyout companies and then moved into private credit in the last decade. All of them were able to identify the vacuum created in the middle-market loans, and quickly move in to grab the market
The major firms that have their primary business from Private Credit include:
| Name | Founded in | AUM USD nn as on 31-Dec-2024 |
| Ares Management | 1997 | 484 |
| Apollo Global Management | 1990 | 616 |
| HSP Investment Partners | 2007 | 123 |
| Golub Capital | 1994 | 75 |
| Blue Owl Capital | 2021 | 135.7 |
| OakHill Advisors | 1991 | 88 |
| Cliffwater LLC | 2004 | 44.85 |
Business model of private credit billionaires: Private credit loans often yield 12%–20%+ annual returns. On top of that, private credit managers charge management and performance fees. They then leverage their funds 2-3x, reinvest repayments into more deals and keep capital locked for 5-10 years. A proper fund structure and strong deal flow keeps the cycle running. As a result, their stock prices go up, and their owners become billionaires
Opportunity opened up in the last decade: The demand for private credit in middle-market expanded in last decade, driven by legislative reforms, bank retrenchment post 2008 GFC crisis, and growing demand for flexible financing solutions. Middle-market loans are designed for businesses with revenues ranging from USD 10million to USD500 million. The US has over 200,000 such middle-market businesses that need finance to fund their growth. The combined AUM of these instruments has risen to USD 1.6trillion as of Jan 2025
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