Private Debt's Thriving Ascent: Opportunities and Insights Amidst Rising Interest Rates

By: Logan Henderson | Published: 08/18/2023
Est. Reading Time:
2 minutes

Private debt continues to establish itself as a significant player in today's financial landscape, experiencing robust growth as an asset class. The industry, worth $1.5 trillion, has experienced a compound annual growth rate (CAGR) of approximately 10% in the past decade. This growth trajectory is expected to accelerate, considering the current macroeconomic landscape, with the combination of a floating-rate structure and market-based pricing for private debt offering the potential for enhanced risk-adjusted returns in response to the rise in interest rates.

Preqin's most recent quarterly update reveals compelling statistics for the second quarter of 2023. During this period, $71 billion was raised with the lion's share of these fresh investments flowing into direct lending ($42 billion) with mezzanine debt also enduring ($18 billion) during the second quarter.

The first private debt fund we partnered with was VSS Structured Capital, a leading name in the industry, with the last three funds being ranked #1 in the Preqin Mezzanine Category by Net IRR, and Pitchbook naming VSS's flagship fund family, the top-rated Credit family across all types.

Given the significant interest Gridline members have expressed in the asset class, we’re excited to announce the upcoming launch of our partnership with a leading direct lending firm that has originated over $150B in loans across a 25-year history. The firm has a significant track record of generating consistent net returns and current income while maintaining low defaults and credit losses.

This is an opportune moment to enter the private credit markets as risk-free rates are at their highest levels for a generation and credit spreads – the amount investors are compensated above risk-free rates for extending risky credit – are at or above their long-term averages.

-Logan Henderson, Founder and CEO

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