„Greed is good", advocated Gordon Gekko in the 1987 Hollywood film „Wall Street", and since then, this has symbolized insatiable capitalism. These days, the managers of credit funds also appear greedy. The globally managed assets of private debt amounted to 1.9 trillion dollars in mid-2023, according to the „Global Private Debt Report“ by data provider Pitchbook, which states that the Assets under Management (AuM) have never been higher.

After the financial crisis, alternative asset classes, including private debt, experienced a meteoric rise. The years of central bank zero interest rate policies drove institutional investors en masse into the arms of credit funds in search of returns. However, in the wake of the Covid-pandemic, the expansion of managed assets has decelerated. It was at 14.7% from 2020 to 2021, dropped to 5.5% the subsequent year, and even further to 2.6% from 2022 to 2023. After the record year of 2021, global fundraising volume for private debt decreased for two consecutive years.

Fund managers see their profits dwindling, which in this case are the management fees they charge their investors for asset management. The temptation is therefore great to fill the gap with private investor money. During the same period while institutional growth has plateaued, the growth rates of retail funds have surged: Rising by 58% from 2020 to 2021, another 58% the following year, and by an additional 12% in the past year.

In absolute terms, retail funds accounted for 287.9 billion euros, still less than one-fifth of the total globally managed assets of private debt. Nevertheless, the share has never been higher, and ten years ago, private investors were almost absent from this business. For now, it is not necessarily reprehensible for an asset class, which has so far clearly been among the winners of the interest rate turnaround, to become more democratized and open to individual investors, the keywords here being: private pension provision, equity pensions, etc.

The question remains whether private debt is doing itself a favour in the long term, or whether the industry is rather jeopardizing one of its greatest competitive advantages over banks: Less strict regulation. Because where private investors are involved on a larger scale, regulators are usually not far away.