The global private credit market has grown from approximately $400 billion in 2013 to over $1.7 trillion today, representing one of the most significant structural shifts in financial intermediation since the deregulation era. The thesis is straightforward: post-GFC banking regulation — Basel III, Basel III.1 (the ‘endgame’), and the fundamental review of the trading book — has systematically increased the capital cost of bank lending, creating a structural retreat from middle-market and sub-investment-grade credit that non-bank lenders have filled.
The Disintermediation Thesis
The numbers are compelling. European bank lending to corporates has declined as a share of total credit from approximately 80% in 2008 to under 60% today. US bank participation in leveraged lending has fallen similarly. Into this gap have stepped private credit managers — Ares Management, Apollo Global, Blackstone Credit, Blue Owl, HPS Investment Partners — with strategies spanning senior secured, unitranche, mezzanine, and distressed credit.
Returns have been attractive: private credit has delivered net IRRs of 8-12% over the past decade with lower volatility than high-yield bonds and lower default rates than broadly syndicated loans. The illiquidity premium — the additional return investors earn for accepting locked-up capital — has been real and persistent.
Gulf Private Credit Gap
The Gulf represents one of the most significant untapped markets for private credit. Gulf banks remain well-capitalised and dominant in corporate lending, but regulatory tightening, Basel III implementation, and the sheer scale of Vision 2030 financing needs are creating the same disintermediation dynamics that drove private credit growth in the US and Europe a decade ago.
Private credit is not a cyclical trade — it is a structural reallocation of credit intermediation from bank balance sheets to institutional capital.