Trends Watch: Private Credit

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Peter Eschmann, Managing Partner, ACME Credit Partners.

What is your outlook for private credit investing?

Private credit is experiencing robust growth and shows no signs of deceleration, driven by expanding opportunities in various sub-strategies like direct lending, distressed assets and asset-backed finance. These segments are penetrating new market areas, competing directly with traditional bond and syndicated loan markets. The sector's evolution continues to broaden its scope annually, with potential extensions into investment-grade opportunities.

Where do you see the greatest opportunities and why?

The current market landscape presents compelling prospects for niche focused investors. Consolidation among regional banks and the scaling up of private credit funds are opening avenues in the lower middle market. Competition for transactions involving companies with EBITDA under $20 million, especially outside sponsor-backed deals, remains comparatively low. Furthermore, favorable deal terms such as robust covenants, enhanced security and attractive pricing are prevalent in this segment.  

What are the greatest challenges you face and why?

Our primary challenge as a debut fund lies in fundraising. The fundraising environment remains challenging for smaller and first-time funds, exacerbated by limited partners (LPs) balancing new commitments with existing investment obligations. LPs heavily allocated to private equity are experiencing prolonged M&A slowdowns due to higher interest rates, affecting distribution timelines.  

What keeps you up at night?

I lose sleep over overarching economic conditions and portfolio performance. Prolonged high interest rates are straining companies' capacity to manage inflationary pressures, contributing to an uptick in defaults and bankruptcies. As opportunistic lenders, we view market volatility as a source of potential investment opportunities. However, I am mindful of broader financial instability triggered by external threats, such as current challenges in the commercial real estate sector, which could precipitate a broader financial crisis.

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.