Investments in private credit have been exploding since the year 2000. But having reached some $1.74 trillion in assets under management (AUM) in 2023, the well of institutional money flowing into this space is showing signs of slowing, according to the WSJ article. So now some of the world’s biggest names in asset management—including BlackRock, KKR, and State Street—want to tap into the individual investor market.
“Alternatives make up less than 3% of the roughly $150 trillion individuals have invested globally, said Eric Mogelof, head of Global Client Solutions at KKR. ‘We anticipate these allocations to rise to 10% or greater in the future.'”
The most ambitious of these plans to connect individuals with private credit assets involve creating private credit ETFs. But this is not easy. There is an inherent contradiction between the relatively illiquid market for private loans, and ETFs which must trade like public stocks. In an attempt to appease regulators and get private credit ETFs approved, some funds plan for a mix of private credit and other, more liquid, assets. Other plans involve repurchase commitments by the issuing firm, to help liquify the market. Funds that limit investor withdrawals—such as Blackstone Group has already used to connect individual investors with alternative real estate assets—are another possibility.
No private credit ETF has successfully launched yet. But for the firms trying to make it happen, the rewards could be enormous. BlackRock expects the private credit space to continue to mushroom to $3.5 trillion in AUM by 2028.