Will Private Credit Lead To Another Financial Crisis: Goldman Answers

Amid the constant barrage of negative private credit news, which most recently saw some of the marquee names in alternative asset management such as Apollo, Ares and Blackrock all gate their investors following a historic surge in redemptions requests by retail and high net worth clients, many are wondering whether the private credit crisis will remain contained to a (still) relatively obscure corner of the global financial universe of will they spill over? 

In a note published by Goldman's Manuel Abecasis, the economist puts private credit risks in a macroeconomic context to answer that question. Not surprisingly, he reaches a rather optimistic conclusion, finding that "private credit stress is unlikely to generate large macroeconomic spillovers on its own" claiming that while "lending by private credit firms will likely tighten in coming months, bank lending to businesses has accelerated recently, corporate sector balance sheets are healthy, and increased AI-related investment demand will likely be a tailwind to credit growth." Still, the bigger risk is that while private credit is unlikely to generate large growth spillovers on its own (and we will counter this optimistic view with a much more pessimistic read on the topic tomorrow), he still cautions that higher overall credit spreads as a result of AI-related uncertainty or a broader tightening in financial conditions would pose larger risks.