Private credit outlook 2023

Current state of the investment-grade private credit market

The investment-grade private credit market remains as competitive as ever with oversubscriptions and allocations ongoing. We continue to see new entrants among US insurers, where investment-grade private credit represents a long-standing core asset class, as well as in non-US insurers. This includes increasingly varied insurer types across health, property and casualty, and reinsurers.

In addition, we’re witnessing a variety of new sector entrants such as pension and alternative asset funds.
In our view, there were ongoing opportunities to invest at a premium to public fixed income alternatives throughout 2022. As we close out the year, investment-grade private credit issuance volumes remain near historic highs.

Notably, there has been an increase in cross-border activity as market dislocations persist, especially in Europe due to the Russia/Ukraine war and related economic uncertainty. We also expect to see more high-quality public issuers look to the private credit market as a funding source as a result of limited domestic market borrowing opportunities and as a means of reducing their execution risk and diversifying their funding.

But with all this activity taking place in such an uncertain economic environment, it is important to consider how investment-grade private credit has historically fared in challenging markets.