Private Markets Battle Exit Backlog and Growing Risks Amid European Expansion Drive | Weekly Pulse

🚨 Must Know: Private Credit's Hidden Rating Crisis

📊 Small Firm, Big Impact: Rating Questions Rock $1.7 Trillion Market

Bottom Line: Egan-Jones Ratings Co., operating from a suburban Philadelphia house with just 20 analysts, has become a massive player in private credit by rating over 3,000 investments in 2024—but major firms like BlackRock, Carlyle, and Apollo are now explicitly excluding the company from their acceptable ratings lists due to quality concerns.

Why It Matters: US insurers' exposure to private credit is approaching $1 trillion, and many rely on upbeat ratings to avoid onerous capital requirements. When one company began missing payments just six weeks after receiving a BBB rating from Egan-Jones, it highlighted how optimistic ratings may be masking real risks in an opaque market where detailed financial information is limited.

Big Picture: The controversy reveals broader concerns about risk assessment in private markets. A withdrawn NAIC report showed small ratings firms graded private investments three notches higher on average than institutional valuators. With private credit becoming systemically important and potentially amplifying financial instability, questions about rating reliability threaten confidence in a market that has exploded in size with minimal regulatory oversight.

🔍 Industry Insights: Strategy & Outlook

⚠️ Private Equity's Existential Crisis

Thoma Bravo's Orlando Bravo declares industry has "lost its way" by focusing on unpredictable macro factors rather than operational value creation, while Sixth Street's Julian Salisbury warns of "bad vintage assets" from 2020-2021 easy money period.

📈 Investment Grade Evolution

Apollo's strategy shift toward investment-grade private credit challenges traditional risk perceptions, with three-quarters of assets now in safer categories rather than leveraged transactions.

🌊 Wealth Democratization Wave

SEC Commissioner Hester Peirce calls for complete elimination of accredited investor standards, while industry executives predict 50% of high-net-worth investors will hold private market products within three years.

🤖 AI Infrastructure Opportunity

Technology uncertainty creates adaptable private credit advantage for funding rapid infrastructure buildout, with Meta and other tech giants tapping private capital for massive data centers.

📉 Performance Reality Check

Dimensional Fund Advisors research reveals private credit fails to outperform public high-yield bonds when properly benchmarked, questioning industry's value proposition beyond marketing.

📊 By The Numbers: Market Metrics That Matter

💰 $34.4 billion 📈 Thoma Bravo's record fundraising haul across three funds, bucking industry slowdown

🏛️ $92 billion 💪 CalPERS private equity allocation after successful overhaul, up from $50 billion

📉 16% 🔻 Projected decline in Q2 buyout deal values due to Trump tariff uncertainty

🌍 $100 billion 🇩🇪 Apollo's potential German deployment over next decade as Europe heats up

⚡ $1.8 trillion 📡 Estimated AI infrastructure needs over next five years driving private credit

🔄 $10.9 billion 📊 Record volume of credit secondaries deals in 2024, up from $2 billion in 2020

🏦 $1.3 billion 💼 Carlyle's strategic investment in insurance brokerage Trucordia

💻 $500 million 🔧 CapVest's commitment to grow Datasite through AI and M&A technology

🎯 25 📈 New interval funds launched in 2025, already surpassing last year's record

⚖️ 30,000 🏢 Unsold private equity companies creating massive exit backlog worth $1.8 trillion

🌍 Market Spotlight: Regional Developments

🇪🇺 Europe Rising as Safe Haven

Apollo's Jim Zelter sees potential for $100 billion in German financing alone, while executives at SuperReturn conference trumpet European opportunities as US tariff uncertainty creates investment paralysis.

🇬🇧 UK Tax Concessions Signal Retreat

Government drops co-investment requirements and minimum waiting periods for private equity carried interest taxation, treating executives' profits at 34.1% rate rather than 45% income tax level.

🇺🇸 America First Policies Backfire

Trump's tariff announcements have reversed private equity dealmaking recovery, with April volumes down 24% as uncertainty makes asset valuation nearly impossible.

🌏 Asia Wealth Channel Expansion

BlackRock targeting hiring drive and digital platform partnerships in EMEA region, while private wealth allocations to alternatives expected to triple globally.

💼 Deal Spotlight: Transactions & Strategies

🔧 Technology Infrastructure Surge

💰 Deal Size: $350 million🏢 Firms: JPMorgan Chase, Morgan Stanley shopping TeraWulf data center financing to private credit firms, highlighting AI boom's capital needs

🏥 Healthcare Services Consolidation

💰 Deal Size: $1.5 billion🏢 Firms: Blackstone leading Baker Tilly's merger with Moss Adams, creating sixth-largest US accounting firm

🎯 Software M&A Technology

💰 Deal Size: $200+ million🏢 Firms: CapVest-backed Datasite acquiring Grata for AI-powered deal sourcing capabilities

🛡️ Insurance Brokerage Growth

💰 Deal Size: $1.3 billion🏢 Firms: Carlyle's Credit Opportunities strategy investing in Trucordia at $5.7 billion valuation

🇮🇹 European Healthcare Refinancing

💰 Deal Size: €225 million🏢 Firms: Diameter Capital Partners and Deutsche Bank providing private debt to BC Partners' DentalPro

💸 Fundraising Focus: Capital Formation

🏆 Record-Breaking Success

Thoma Bravo closes $24.3 billion flagship fund, largest global private equity fund of 2024-2025, plus $8.1 billion Discover fund and €1.8 billion European strategy

🔄 Secondaries Momentum

Neuberger Berman wraps up $4+ billion for GP-led secondary deals, four times predecessor fund size as continuation vehicles surge

💳 Private Credit Expansion

TCW Private Asset Income Fund launches with Apollo anchor commitment, while Capital Group-KKR unveils interval funds holding 40% private credit

🌐 Wealth Channel Innovation

Vanguard, Wellington, and Blackstone file plans for interval fund, as 25 new vehicles launch in 2025 alone

🎯 Targeted Strategies

Nine Dean raises Ford Foundation backing for employee-focused private equity with no exit deadlines

🔮 Trends to Watch

🔄 Continuation Vehicle Explosion

Private credit firms flooding market with new structures as M&A drought and tariff volatility force alternative liquidity solutions

🏦 Systemic Risk Emergence

Moody's Analytics warns private credit has reached "systemic importance" with potential to amplify financial instability through interconnected networks

💻 Technology Infrastructure Bottlenecks

Operations and tech becoming true growth constraints for first time as firms expand beyond institutional clients into complex wealth products

🌍 Geographic Capital Rotation

European markets gaining momentum as US political uncertainty drives institutional investor reallocation toward perceived stability

📱 Retail Access Revolution

Interval funds emerging as preferred vehicle for private market democratization, offering quarterly liquidity versus ETF daily trading requirements

🔍 Secondary Market Maturation

Credit secondaries market could reach $50 billion within five years as 8-9 year fund durations create same liquidity pressures as traditional private equity

📝 Bottom Line: 

Private markets face a defining moment where traditional strategies must evolve amid rating controversies, exit challenges, and regulatory pressure. While technology infrastructure and wealth democratization offer growth opportunities, the industry must navigate systemic risks and performance questions that threaten its value proposition. Winners will be firms that adapt quickly to new liquidity demands, geographic shifts, and operational complexity while maintaining underwriting discipline in an increasingly uncertain environment.