Growth of Private Debt Market Reveals Cracks in Infrastructure

As private debt managers increase assets in favorable market conditions, many are beginning to struggle operationally as innovation outpaces the supporting infrastructure. Chad Burhance, CEO of Oak Branch Advisors, examines the hurdles today’s private debt managers face, emphasizing the role technology and skilled partners can play in helping managers overcome operational challenges and achieve greater growth.

Private debt is on a roll. In 2019 annual fundraising topped $100 billion for the fifth consecutive year, more than quadruple the amount raised just ten years earlier. Looking ahead, assets are forecast to reach $1.46 trillion in 2025, up from $848 billion in 2020 – an increase of 11.4% annually. 

Fuelled by persistently low-interest rates and regulatory changes disincentivizing banks to lend to riskier clients, private debt managers have stepped into the void, issuing credit across real estate, consumer credit, commercial credit, mortgages, and student loans.

While investor demand continues to grow, largely driven by portfolio diversification benefits and a quest for higher fixed-income yields, the picture isn’t all rosy for private debt managers as they look to deploy nearly $300 billion in dry powder. As with many emerging investment markets before it, its success has led to various growing pains.

This article was originally published in Sensus Magazine. Access the full article by downloading a PDF of the magazine by clicking the image below. The article can be found on pages 10 – 13.