Goldman Sachs Foresees Continued Growth in Private Credit Market

Goldman Sachs has released an extensive evaluation of the private credit landscape, asserting that the sector's foundational significance in corporate finance endures and is poised for increased expansion, notwithstanding recent instabilities observed in retail-centric business development companies (BDCs).

The bank's credit strategy research team highlights a crucial differentiation between the retail BDC segment, which has garnered considerable attention recently, and the institutional capital that constitutes the majority of global private credit assets under management. A core tenet of the bank's argument is that the private credit market is not excessively large compared to alternative financing avenues, indicating substantial potential for further growth. This is particularly true beyond the United States, where bank lending still plays a more dominant role in corporate funding than in North America. Goldman Sachs supports this perspective by referencing the vast number of privately held businesses; for instance, 63% of U.S. companies generating at least $100 million in annual revenue are private. This percentage is even higher in the European Union and the UK, with the combined annual revenue of private firms across these three regions reaching nearly $12 trillion.

A significant structural point within the assessment pertains to the increasing average deal size in syndicated credit markets. Goldman Sachs posits that this trend has effectively elevated the minimum viable threshold for companies seeking access to leveraged loan or high-yield bond markets. With the average high-yield bond transaction size standing at $791 million between 2022 and 2025, smaller enterprises requiring more modest debt financing increasingly find syndicated markets unsuitable. This reinforces the critical role private credit plays in providing funding for middle-market borrowers. The bank also acknowledges the growing fluidity between private and syndicated markets, noting 97 instances of private market 'steals' from the USD leveraged loan market since late 2021, totaling $139 billion in refinancing volume. This bidirectional flow of borrowers between these channels challenges the notion that companies only resort to private credit when other options are exhausted. The emergence of substantial private credit loans, defined as transactions exceeding $1 billion, has further enlarged the accessible market, enabling private lenders to compete for borrowers that traditionally would have sought syndicated market financing. Regarding performance, Goldman cites data from the Cliffwater Direct Lending Index (CDLI), an asset-weighted index encompassing over 21,000 U.S. middle-market loans. This data illustrates that private credit outperformed both the USD high-yield bond and leveraged loan indices in 15 of the past 21 years, with realized losses for 2025 recorded at 64 basis points, below the historical long-term average of 100 basis points.

The report characterizes crucial fundamental metrics, such as payment-in-kind activity and non-accrual rates, as stable rather than deteriorating. It also identifies the overarching macroeconomic growth environment as the primary factor influencing the low loss rates observed to date. Addressing the prevalent discussion regarding concentration in the software and technology sectors, Goldman observes that both private credit and the broadly syndicated leveraged loan market exhibit significant exposure to this sector. This implies that any disruptions to private credit portfolios stemming from AI-related advancements would likely impact syndicated markets to a similar extent. The enduring strength and adaptability of the private credit market demonstrate its pivotal role in supporting business expansion and financial health, fostering a dynamic and resilient economic landscape.