Ashwin Gopwani: Welcome to our podcast series, Checking In, Looking Ahead. In today's episode we're talking about private credit. Specifically, we're discussing the outlooks for the investment grade or IG private credit market, non-investment grade or non-IG private credit market and real estate debt markets. I'm Ashwin Gopwani, Managing Director and Head of Retirement Solutions at SLC Management. Joining me today is Elaad Keren, Senior Managing Director, Co-Head of Private Fixed Income at SLC Management, Jason Breaux, Managing Director, Head of Private Credit at Crescent Capital Group and Abbe Borok, Managing Director and Head of U.S. Debt at BGO. Thanks everybody for joining us today. Let's get right in and start by defining private credit. At its core, private credit refers to privately negotiated loans between a borrower and a non-bank lender. Now, that can take many forms and fortunately our panelists are experts in the main flavors. Jason, your area of expertise is in non-investment grade private credit. Could you define this for our listeners?
Jason Breaux: Hi, Ash. Private credit, as you say, generally refers to lending by non-bank financial institutions directly to companies or assets. It can encompass a wide range of debt financing solutions across borrower profiles, asset types, capital structures. The solutions include corporate loans such as direct lending. It can include mezzanine loans, special situations or distressed investing, underperforming companies, specialty finance products, such as net asset value loans, and real estate and infrastructure debt. Private credit strategies may span a wide range of borrower types from corporates to real assets, mature to start up enterprises, and can appear at nearly every level of the capital stack from senior secured investment grade debt to non-investment grade senior and junior debt, to even hybrid securities like structured equity.
Ashwin Gopwani: So, Jason, follow up question, where do you see investors using non-investment grade private credit in their asset allocations?
Jason Breaux: We believe private credit has become a leading allocation for those seeking income diversification and downside protection. Non-IG private credit generally commands higher yields than liquid alternatives like broadly syndicated loans and high yield bonds – on the institutional side it’s a major allocation for liability investors like insurance companies and corporate defined benefit plans, and also for return seekers like pension plans and endowments and foundations, given the premiums available relative to other fixed income alternatives. Private credit has also been democratized into the wealth channel in recent years through broad expansion of the types of offerings available to investors to make the asset class more widely accessible, with lower investment minimums, simplified tax reporting and liquidity features.
Ashwin Gopwani: Great. Thanks, Jason. And I think that does reflect a lot of what we're seeing in the market as well. So that that really resonates. Next, I'll go to Elaad. Your focus is on investment grade private credit. What is it and how does it compare to the non-investment grade private credit that Jason just described?
Elaad Keren: Thank you, Ash. That's a great question. Often people don't know what investment grade private credit is and often we compare it to the non-investment grade that Jason just described. It is definitely not non-investment grade private credit as most people think of when they think of private credit, although it does have some similarities. I would say that the investment grade private credit sits neatly between public IG, what's available on the public IG side and what Jason described as non-investment grade private credit. In essence, it's a debt instrument that's available for qualified investors that is not registered with any regulatory authority and traded privately. There's a lot of flexibility in its offerings and its application of use, but in essence, it's a customized financing solution for an issuer that either supports general corporate purposes or specific project or financing for an asset need. It is predominantly fixed rate, although floating rate is a large and growing component of it. And it's often secured, although also available in unsecured formats, and it's often a senior in the capital stack of a borrower. Typically on the investment side, covenants are maintained, they are prevalent in our space and tenors are quite flexible starting on the short end from floating all the way to super long 40-year terms available. You know the market is continually growing. It's hard to define, as it is private, but if we look to some proxies available in in the marketplace, it is continuing to grow year over year at a record setting pace, as the application of the use of private debt on the investment grade side continues to grow and issuers are coming into the marketplace looking for financing solutions that are provided through private solutions.
Ashwin Gopwani: Thanks, Elaad. And a follow up question for you as well: I believe this asset class started mostly of interest with the insurers. Could you tell us, are they the main investors today, or who else is interested in private credit if not?
Elaad Keren: Definitely, insurers dominated this asset class. Insurers have been investing in this asset class for multiple decades. I would say, as you correctly pointed out, there's been a lot more application of the asset class from an investor perspective. The asset class has certainly benefited from growth from all types of investors looking for incremental yield pickup without taking on disproportionate risk.1 This asset class has really been able to service that need as investors are looking to pick up yields in a competitive environment when, especially in today's market, spreads are continuing to come in. That being said, it's often that we're considered an alternatives provider and we're sometimes put up against, you know, the product that Jason just described. I'd say that's an incorrect categorization. We don't have specific hurdle rates and we don't have a high yield and we're always relative to what's available on the investment grade public side. If you think about our best use application, you if you think about a liability driven investment profile where you're looking to match, you know, certain assets with target duration to liabilities. This is a great asset class for that in the traditional sense. You mentioned insurance companies, they've certainly utilized this asset class for asset–liability matching purposes and it's a great asset class that can really stretch out on the longer-duration types of liabilities to meet those cash flows with a high-quality and hopefully earn an incremental yield pickup for that risk.
Ashwin Gopwani: It makes sense that if the long-duration insurance companies like it, for example, that other long-duration investors, like maybe even pension plans, like the asset class.
Elaad Keren: Absolutely. We've seen, we've seen a great uplift and increase from pension plans looking to this asset class to provide just that, Ash.
Ashwin Gopwani: Perfect. Thanks, Elaad. Next over to Abbe, what is real estate debt and how do you see it fitting in with the world of private credit as Elaad and Jason just spoke to?
Abbe Borok: Sure. Thanks, Ash. So, real estate debt is a form of asset-based finance where debt capital is provided to borrowers. For real estate, it's typically owners, operators or developers of commercial real estate assets. And the loan that we make is secured by the real property as collateral. And there are various commercial real estate assets that can serve as that collateral, such as multifamily properties, industrial assets, office buildings or even other more niche or specialized types of commercial properties such as cold storage or data centers. Our senior priority in the capital stack means we're focused on preserving capital while generating stable income. From an investment perspective, it allows investors to access real estate fundamentals without taking on the full volatility and risk of equity. It's a strategy that balances downside protection with consistent risk adjusted returns, and we would argue it's especially valuable in more uncertain market environments like what we've experienced over the last few years.
Ashwin Gopwani: Thanks, Abbe. And what, what types of investors would you typically see being interested in real estate debt?
Abbe Borok: Similar to Jason and Elaad, we're seeing strong and growing demand from a pretty wide range of investors – institutional investors, including pension funds, insurance companies, endowments and sovereign wealth funds are actively allocating to real estate debt. And they're drawn to some of the characteristics I mentioned before: the predictable income, relative stability and in this case the asset-backed nature of the investment. I'd say insurance companies in particular value the capital efficient nature of the asset class and we're beginning to see more insurance-friendly structures like rated notes making their way into the real estate debt offerings. And more recently, we're seeing increased interest from private wealth platforms and high net worth individuals who are looking for alternatives to their traditional fixed income and want access to private market strategies such as real estate debt.
Ashwin Gopwani: Great, thanks Abbe. Now that we've described private credit, the next set of questions are going to be focused on the current market environment. Interest rates remain high, stock markets are near record levels and global trade uncertainty remains. It's been an interesting time for every asset class. Private credit is no different. Abbe, I'll start with you this time. How have the current market conditions impacted real estate debt?
Abbe Borok: Sure. Ash, you touched upon a number of the themes and I'd echo that the current market environment – higher for longer interest rates, more volatile credit markets and, particularly, the retreat of more traditional lenders like banks in the market – have created a significant shift in the real estate debt landscape and private credit markets in general. Higher base rates have actually enhanced our returns on newly originated loans. Which is great for lenders, but they've also introduced some dislocation in the market, especially for those facing refinance pressures and particularly those carrying floating rate debt. And that creates opportunities for private or alternative real estate lenders who can come in and provide more creative solutions for borrowers in the market. So, we're very focused on those opportunities. At the same time, as I mentioned, the pullback from banks has created a real opportunity for private lenders to step in and fill the void with that more flexible and creative capital. And we're able to underwrite with discipline, command stronger structures and in many cases work with really top-tier borrowers/sponsors on their real commercial real estate finance needs. All that, in my mind, has kind of strengthened the long-term case for real estate private credit and we're pretty excited about the opportunity set in front of us.
Ashwin Gopwani: Thanks, Abbe. Jason, I know that Abbe just mentioned higher rates and I know that that has a particular impact on traditional private credit. What do higher rates and therefore the longer hold periods mean for traditional private credit?
Jason Breaux: Thanks, Ash. With higher-for-longer rates, it's been increasingly challenging to return invested capital to investors. In direct lending, higher for longer can be accretive to multiples on invested capital as we get to keep our loans outstanding for longer periods of time. The flip side to that certainly is that manager selection becomes an even more critical aspect of investment outcomes, since those credits that are in the ground for longer need to remain healthy. There will be winners and losers in this higher-for-longer environment versus a more benign backdrop where everyone can be a winner. As private equity keeps assets in the ground for longer, some examples for us, there are more amend-and-extend options, more add-on activity for us as lenders when sponsors look to continue to create value at their individual portfolio companies as they hold them for longer. There's also transitional capital opportunities to reconfigure balance sheets and reduce cash interest burdens. And there are, importantly, secondary liquidity opportunities as well, as there remains a need for capital to be returned and liquidity to be generated. So, examples of these types of opportunities include continuation vehicles and limited partner- and general partner-specific liquidity opportunities through various forms of fund financing. And finally, there are even private credit opportunities available to the banks to assist them with enhancing liquidity by optimizing their regulatory capital requirements.
Ashwin Gopwani: Thanks, Jason. How are portfolios holding up?
Jason Breaux: On the portfolio side, direct lending portfolios are holding up well for the most part. I'd call out a few current areas of focus for us: 1) potential tariff exposure; 2) the rise of PIK, or payment-in-kind or non-cash interest; and 3) credit quality. On tariffs, I'd say most direct lenders have minimal direct tariff exposure as the majority companies are U.S.-based and not in industries primarily affected by tariffs. I think the exception in some cases is concentrated at the upper end of the middle market where direct lenders are competing with the broadly syndicated loan market for larger companies that are more global in nature and therefore may encounter more issues with the import, export or transport of goods across borders. On the PIK point, we've certainly seen an increase in PIK or non-cash interest as a percentage of total investment income for a number of direct lenders given the higher-for-longer rate environment, and the fact that a number of companies have not been able to reduce high levels of leverage that were put on in a zero-base-rate environment. And on credit quality, we're tracking defaults. Sponsored direct lending default rates continue to be lower than non-sponsored in the public markets. Sponsored direct lending default rates by count are sub 2% compared to 3% for non-sponsored, over 5% for broadly syndicated loans and 3% for high yield.2 These will be areas that we'll continue to watch quite closely across the direct lending landscape.
Ashwin Gopwani: Great, thanks Jason. Over to you, Elaad. I think that higher-for-longer could mean something different for investment grade private credit given the fixed-rate nature of most investment grade assets. So, could you just tell us: what does the current market environment, including currently higher interest rates, mean for investment grade private credit?
Elaad Keren: Ash, certainly it's an interesting question, you know, higher for longer. When I think about that question, I think of issuance. Definitely issuers benefited from when it was a lower-for-longer interest rate environment, where they were able to issue at really low interest rates. Now we're at a different environment where it's higher for longer, and if an issuer has flexibility with respect to timing for its financing needs, maybe a higher interest rate environment is going to defer investment or defer launching of a project and therefore defer the requirements for financing. Now that being said, you know on the flip side we have spreads coming in. So, their total cost of borrowing is offset from the higher base rate environment that we find ourselves in. That's one aspect of a higher-for-longer. As you mentioned, the majority of the space is fixed. So, we're not seeing any weaknesses in portfolios as a result. We are, you know, just looking at the macroeconomic impacts of where we're at and with the higher interest rates and we're looking to see whether portfolios hold up well. I think there's a lot of strength within the universe on the investment grade side, there's no difference there. So, we're quite pleased with the strength of the portfolios. I'll just pick up on something Jason said when he talked about the financings that are required for the asset managers who are holding on to assets longer. There's a lot of similarities to what he said on the investment grade side as well. There's certainly a sector of fund finance that caters to the investment grade investor. There's a lot of issuance in that space that we've seen increase over the last number of years due to the dynamics that Jason just described. We're seeing a number of increases in secondary strategies for managers coming in, raising secondary funds, a lot of continuation vehicle financing. A lot of the debt for those vehicles is being raised through the investment grade private credit market. So, we're seeing a lot of increased investment opportunity in in secondary NAV financing fund opportunities and also on the primary side. So, it's just an interesting dynamic that Jason described, and also carried crosses over to the investment grade side as well.
Ashwin Gopwani: Great. Thanks, Elaad. Our final set of questions is on what our panelists expect for their asset classes for the remainder of the year. Elaad, this time I'm going to start with you. What's your outlook for investment grade private credit?
Elaad Keren: It's a really good question. If I think year-to-date with all the geopolitical headlines and all of the macroeconomic issues that have been making headlines, the resilience of the investment grade private credit asset class has really shown. We've had a great first half of the year, and although I don't have a crystal ball to say what's going to happen from a geopolitical and macroeconomic front, I would say the resilience of the market is going to continue. I think there's a tremendous amount of investment opportunity coming online. We're expecting it to be a busy second half of the year on top of a very busy first half of the year, Ash. So, I'm pretty excited about what's to come with respect to the investment grade private credit market. And I think that's just a testament to the application of it from an issuer perspective that I touched on in the beginning. There's been a lot more evidence of it being used by issuers and for those issuers coming into this market in times when there is some uncertainty to ensure that they get certainty of execution and they get the financing that they need. And I think that's going to continue into the second half.
Ashwin Gopwani: Awesome. I'm, I'm glad to hear the enthusiasm and definitely no crystal balls here. But hey, I trust your word on what you think as an expert in that field in terms of investment grade private credit. Abbe, similarly to you, what's your outlook on real estate debt? You're in the markets every day, you're seeing what's going on, what do you think is going to happen for the rest of the year?
Abbe Borok: We're pretty excited about the outlook and the opportunity set that we see in front of us. The real estate debt capital markets have definitely come back in the last 6–12 months. We see that in our portfolio and pipeline. As I mentioned before, many traditional lenders continue to remain on the sidelines or, frankly, are just lending at a lower attachment point in the capital stack. So, there is a rising need for alternative capital and private credit in the real estate debt capital market. We like our pipeline, we think risk adjusted returns remain attractive, but we're still able to, you know, maintain our strong covenants and have what we consider tight structures on these loans. We’re pretty happy with the forecast going forward for the next couple of years. Importantly, on the real estate equity side, we're starting to see transaction volume pick up as well. So, across refinancings, asset sales, recaps or even construction loans on new developments, we're predominantly focused on construction loans on residential assets which are meeting a very acute need for housing in the U.S. So, a lot of demand for that asset class. And that reactivation in the equity markets creates increased demand for our flexible, creative real estate loans. Looking ahead, we think the market continues to provide interesting opportunities. We really rely on our expertise to kind of navigate through cycles or even mini cycles like we saw in April’s dislocations in the market. We continue to maintain a disciplined underwriting framework and are excited about the opportunities that we're sourcing in the market through the BGO brand.
Ashwin Gopwani: Lots of excitement here in terms of the rest of the year and glad to hear that things are turning around in terms of the real estate market. Jason, last but not least, what's your outlook for traditional private credit?
Jason Breaux: We think the future for non-IG private credit is very bright. It has experienced tremendous growth over the past decade, becoming a core component of the alternative investment landscape. Investor allocations have surged as demand for non-bank lending has increased. Fueled by the search for income and premium diversification, today the asset class represents over $1.6 trillion.3 Institutional investors have obviously led the charge, drawn by private credit's combination of strong risk adjusted returns, stable cash flow generation and lower correlation to the public markets. When I look at deployment activity going forward, while there are strong fundamentals supporting M&A and leveraged buyout activity, including a sizable backlog of deals, with pressure from limited partners to return capital as we discussed and significant sponsor and lender dry powder to finance those deals, there are some headwinds in terms of activity. Specifically tariff, economic and geopolitical uncertainty, combined with sponsors unwillingness to transact on deals purchased in the prior rate environment, which could push out some meaningful M&A and leveraged buyout activity into later this year and 2026, when there's greater certainty on the aforementioned issues and potentially some rate cuts. That said, good companies are still trading at attractive multiples in the current environment. In terms of fund inflows, capital has increasingly flowed to fewer larger managers, contributing to greater market concentration and the rise of multi-billion-dollar direct lending funds. This trend has institutionalized the asset class and reinforced private credit's role as a long-term strategic allocation. However, it's also introduced some new challenges. Larger fund sizes mean more competition for deals and pressure to deploy capital quickly, often requiring participation in larger transactions. And something that Abbe alluded to in her space, similarly in this environment manager selection and underwriting discipline matter more than ever. One of the keys to successful credit investing is loss avoidance, so we think that making sure that you're partnered with managers who do not compromise their underwriting standards for the sake of growth is paramount.
Ashwin Gopwani: Great to hear a lot of optimism from all of our panelists. Given all the challenges that are going on right now, great optimism in terms of the outlook for each of the asset classes within private credit. Definitely some common themes here for sure that, just given what's going on, it really makes sense to have a disciplined approach to the asset class. And it really sounds to all three of you to take that approach when you're considering your asset class. Elaad, Abbe, Jason, thank you very much for participating. That's all the time we have for this episode of Checking In, Looking Ahead. For more information, visit slcmanagement.com. Thanks for listening and have a great day.
1. Private Placement Monitor, 2025.
2. Source: Kroll Bond Rating Agency, 2025.
3. Source: Preqin, 2025.
Sources: Bloomberg, Private Placement Monitor, CoStar, RCA, Preqin, Kroll Bond Rating Agency, 2025. Content was recorded on July 30, 2025, and reflects views of the participants as of that date. SLC Management terms “expert” and “expertise” based on the level of comprehensive knowledge possessed by SLC Management investment specialists in a given sector of the private credit and/or real assets market.
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