Private credit now accounts for about $2 trillion of assets across consumer credit, real estate credit, and corporate lending. But how big could the market become?
Fortress believes roughly $6 trillion of US credit could reasonably transition from banks to private sources of capital: a fundamental reshaping of how credit gets provided.
The 2023 regional banking crisis accelerated that shift, as banks pulled back meaningfully from lending and left a significant gap in the market.
Watch to understand what's driving the growth of private credit and what it may mean for the broader economy.
Drew McKnight:
The private credit market continues to grow, but just how big could the market become? What's been driving the growth and what does it mean for the broader economy?
Private credit has expanded far beyond what used to be called the shadow banking system and beyond just direct lending. It's now a widely established source of capital across industries and across the globe. Today it includes consumer credit, commercial and residential real estate credit, alongside traditional corporate lending – and accounts for about $2 trillion of assets. And since private credit is more patient capital, it can be better aligned with the borrower's longer term growth goals.
So how big could the industry get? We believe there is about $6 trillion of credit in the US that could reasonably transition away from banks to private sources of capital. That figure represents the entire universe of growth opportunities as we see it today, including credit that banks traditionally provided as direct lending to companies, as well as personal loans to consumers and other types of asset-based lending.
What we're really looking at is a fundamental reshaping of how credit gets provided in our economy. And from that perspective, the amount of capital that could potentially move from the banking system into private credit is frankly immense.
This reshaping of the credit markets accelerated after the regional banking crisis in early 2023. That shock caused other banks to pull back meaningfully from lending, and that created a significant gap in the market.
A lot of people question whether private credit is enhancing the overall health of the financial system. We believe the answer to that is a resounding yes. The banking crisis in 2023 was caused by an asset-liability mismatch. The banks had long-term assets matched with short-term liabilities and deposits. When depositors wanted liquidity, that caused a run on the entire banking system.
So while we see about a $6 trillion window of opportunity today, we also believe that number will grow in the years ahead. And we understand that with opportunity comes responsibility: a responsibility to provide stability and consistency to credit markets by offering patient capital when traditional lenders just can't or won't.
