Alternative Credit Evolution Takes Center Stage

In Brief:

Joel Holsinger, Partner and Portfolio Manager at Ares Management where he co-heads the $40+ billion alternative credit division, shared insights on the S&P Global podcast about the rapidly evolving alternative credit landscape. With 27 years of experience in asset-based finance, Holsinger detailed how the market has transformed from being dominated by banks to becoming a fragmented space now undergoing reconsolidation. He emphasized that alternative credit—investing in portfolios with contractual cash flows—is experiencing dramatic growth as regulatory changes push banks away from certain sectors, creating opportunities for firms like Ares that can deploy capital at scale.

Big Picture Drivers:

• Regulatory shifts: Basel regulations and Dodd-Frank have pushed banks away from holding certain assets, creating market gaps

• Liability transformation: Assets once held on bank balance sheets now require match-funded structures with wider spreads

• Scale advantage: Large players like Ares can consolidate fragmented markets and provide flexible capital solutions

• Market expansion: Alternative credit spans a $30+ trillion market compared to $5-6 trillion for corporate credit

Key Topics Covered:

• Alternative credit definition: Portfolios of assets with contractual cash flows from corporate or consumer payments

• Market evolution: How assets moved from bank balance sheets to private credit funds since the 2008 crisis

• Fund finance: Growth in subscription lines, NAV lending, and GP solutions as emerging opportunities

• Bank partnerships: How private credit both competes with and complements traditional banking

Key Insights:

• Spread expansion: Assets leaving bank balance sheets typically command 200-500 basis points wider spreads in private markets

• Rated transactions: Growth in private rated deals is reducing public market supply, tightening spreads

• Capital relief trades: Significant risk transfers (SRTs) help banks optimize regulatory capital while partnering with private credit

• Scale matters: In credit, scale provides competitive advantages in sourcing, liability management, and infrastructure

By The Numbers:

• $464 billion: Total assets under management at Ares Management

• $330+ billion: Credit assets at Ares, with $40+ billion in alternative credit

• 150-700 basis points: Spread ranges across alternative credit investment strategies

• $3,500: Approximate cost to save a life through global health initiatives supported by Holsinger

Memorable Quotes:

• "Everything we lend against, everything we invest across our portfolios are assets... everything has contractual cash flows." - Joel Holsinger

• "It's the liability stupid... what changed or evolved was the liabilities." - Joel Holsinger

The Wrap: 

The rise of alternative credit represents a fundamental reshaping of financial markets, creating a new pillar alongside traditional banking, insurance, securitization, and sovereign wealth. Holsinger's perspective reveals how regulatory changes have triggered not just business opportunities but structural transformations. His integration of charitable giving with fund performance—directing 5-10% of promote to health and education causes—demonstrates how financial innovation and social impact can reinforce each other in today's alternative credit landscape.