In the United States, concern about private credit is growing and there are those who are talking about a new “subprime”. It’s already a billion-dollar industry, with little oversight, financing companies. The war in Iran has worsened the risk and there are companies struggling to pay.
Private credit, or in Portuguese private credit funds, emerged with strength after the 2008 crisis. Operate outside the traditional banking system and are not subject to the same rules as banks.
“It is a way of lending money privately, that is, (…) it is investing in a company that is private, that is not listed”, explains João Moreira Rato, company manager.
Investors can be pension funds, insurance companies, funds that manage family fortunes and even people with high financial literacy.
North American funds Apollo, Blackstone, Blue Owl and Ares Management had to limit redemption requests. At issue are loans of two to three billion dollars.
The money was loaned to artificial intelligence and software companies and the peak occurred during the pandemic with the AI boombut what could prove to be a problem was the fact that banks had lent money to the funds and these same loans were overvalued.
In the United States, fears of a crisis and a possible contagion to the financial system. Due to the war, a rise in interest rates is almost certain and energy costs are also a factor.
The default rate is rising and according to Fitch it is close to 10%.
The CEO of JP Morgan Chase, one of the largest banks in the United States, even said that private credit losses could be greater than expected. After these statements, he backed off and said that “private credit probably does not pose a systemic risk.”
