Private Credit At Crossroads Amid Macroeconomic & Regulatory Shifts

In Brief:

Private credit markets are experiencing explosive growth as traditional bank lending retreats, creating a fundamental shift in how companies access capital and investors generate returns. What started as a $2 trillion niche market serving private equity sponsors has evolved into a $30 trillion global opportunity encompassing infrastructure, real estate, and investment-grade corporate lending.

Four industry titans managing hundreds of billions in assets gathered at the Milken Institute Global Conference 2025 to discuss this transformation: Michael Buchanan, Chief Investment Officer at Western Asset Management Company; Peter Gleysteen, Founder and CEO of AGL Credit Management; Deborah Orida, President and CEO of Public Sector Pension Investment Board; and Michael Zawadzki, Global Chief Investment Officer for Credit and Insurance at Blackstone Group.

Their collective perspective reveals an industry at an inflection point, where regulatory constraints on banks, technological advances, and institutional capital allocation trends are creating unprecedented opportunities for sophisticated lenders willing to navigate economic uncertainty.

Big Picture Drivers:

• Regulatory Constraints: Bank regulations implemented after the financial crisis continue driving banks away from long-term lending, creating massive opportunities for private credit providers

• Technology Integration: Advances in financial technology are blurring traditional boundaries between public and private credit markets, enabling more sophisticated investment approaches

• Economic Uncertainty: Ongoing trade negotiations, policy implementation challenges, and global economic transitions are creating both volatility and opportunity in credit markets

• Interest Rate Environment: The return to higher interest rates after years of near-zero rates is fundamentally changing risk-return dynamics across all credit asset classes

Key Topics Covered:

• Private Credit Evolution: Discussion of how private credit markets have expanded beyond traditional sponsor-backed finance into infrastructure, investment-grade corporate lending, and asset-backed finance

• Bank-Private Credit Partnerships: Analysis of increasing collaboration between traditional banks and private credit providers as regulatory constraints reshape the lending landscape

• Investment Opportunities: Identification of specific sectors and strategies offering attractive risk-adjusted returns in the current environment, particularly infrastructure and asset-backed finance

• Market Structure Changes: Examination of how the blurring lines between public and private markets are creating demand for multi-asset credit approaches

Key Insights:

• Private credit opportunity expansion: The private credit market extends far beyond the commonly discussed $2 trillion sponsor-backed finance sector to encompass a $30 trillion global opportunity including infrastructure, real estate credit, and investment-grade corporate lending.

• Bank partnership evolution: Banks are transitioning from defensive to offensive strategies in their relationship with private credit providers, seeking partnerships to maintain customer relationships while offloading regulatory capital-intensive lending activities.

• Infrastructure credit convergence: Asset-backed finance and infrastructure credit represent particularly attractive opportunities, offering 150-200 basis points of excess spread over liquid credit while providing diversification from traditional corporate credit exposure.

• Institutional capital migration: Large pension funds and institutional investors are actively reallocating capital from public fixed income to private credit strategies that offer better risk-adjusted returns in the current environment.

• Market boundary dissolution: The blurring of lines between public and private credit markets is creating demand for multi-asset credit approaches that can capture opportunities across the entire spectrum of credit investments.

• Credit quality strength: Current private credit fundamentals remain exceptionally strong with better loan structures and higher credit quality than historical periods, including pre-financial crisis markets.

Memorable Quotes:

• "The private credit opportunity is $30 trillion plus right. And much of that is in the areas you're highlighting. This intersection between real assets, infrastructure, asset-based finance, real estate credit." - Michael Zawadzki, explaining the vast scope beyond traditional private credit definitions

• "We have $45 billion in public fixed income that we see opportunities to activate into private credit in ways that can give us really interesting investments that are well suited to this macro environment." - Deborah Orida, describing institutional capital allocation trends toward private credit

• "Credit quality has never been higher, loan structures have never been more robust, quality of companies and portfolios best it's ever been." - Peter Gleysteen, comparing current credit conditions to historical periods including pre-financial crisis markets

• "Banks are shedding or being in the future will hold fewer and fewer long-term assets. So corporate lending broadly will increasingly be supplied by non-competitive partners to banks globally." - Peter Gleysteen, outlining the structural shift driving private credit growth

• "In private credit 80% of our 20 billion private credit book is directly invested, 20% is in funds. And that's a business that we've been growing since 2015." - Deborah Orida, revealing how sophisticated institutions are building direct lending capabilities

The Wrap: 

The private credit revolution represents one of the most significant structural changes in finance since the banking deregulation of the 1980s. What began as an alternative for private equity sponsors has evolved into a mainstream institutional asset class offering superior risk-adjusted returns across a $30 trillion global opportunity set. The convergence of regulatory constraints on traditional banks, technological advances enabling more sophisticated credit strategies, and institutional investors' search for yield is creating a perfect storm for private credit growth. Most importantly, this transformation is happening during a period of exceptional credit quality and structural advantages that position private lenders to support economic growth while delivering attractive returns to investors.