It’s safe to say that when it comes to investing, Gareth Henry is a household name. Known amongst many investors as the Managing Director of Fortress Investment Group, over the last quarter year, Gareth has been very outspoken when it comes to private credit and its importance for institutional investor’s. There are many instances when having private credit can actually be a life saver.
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Understanding Private Credit
Private credit is not a publicly traded commodity rather they are held and originate from private lenders not associated with any bank. Private credit takes on a wide variety of legal forms from personal loans to bonds and notes. Whatever the legal form, According to Gareth Henry, private credit is on the rise. A recent Preqin report stipulated that direct lending made up roughly 30% of the private credit market, accounting for the second largest share credit.
How Direct Lending Works
Take it from Gareth Henry, direct lending isn’t complicated, essentially its good old fashion bank lending, without the bank. Initially, Asset managers like Oaktree Capital comprised the lion share of the direct lending market, often offering investors low-interest direct loans with much more agreeable terms than a traditional bank loan depending on your credit. Could this be why direct lending is becoming increasingly popular among investors and business owners alike?
Factors Behind The Boom In Direct Lending
After Oaktree Capital set the trend, other businesses have risen up offering better exclusive terms and conditions giving rise to the direct lending boom we now find ourselves in. According to Gareth Henry, Americans now hold an average of over six thousand dollars of credit card debt with credit scores ranging between six hundred and fifty and six hundred and eight five. This fact is what is giving rise to an increased interest in alternative funding mechanisms that offer better rates and borrowing terms when compared to traditional banks.