The BlackRock Investment Institute says it prefers private credit to public credit because the banking turmoil has made traditional lenders cautious, opening up new opportunities in the funding market.。

BlackRock strategists wrote in a report released on Monday: "We believe that private credit may help fill the gap left by banks reclaiming some of their loans and provide investors with potentially attractive yields.。The report also said the preference would continue for five years or more.。

Since 2022, the Fed has made a "ten-plus" increase in federal interest rates to fight inflation.。High interest rates hit some U.S. banks。Banks such as Silicon Valley Bank, Signature Bank and First Republic Bank may go bankrupt or be acquired and restructured.。In the US, bank lending fell to its lowest level since 2008 as regional banks came under pressure。

Meanwhile, private credit has been booming。including Apollo Global Management Inc..), Blackstone Group (Blackstone Inc..) and Carlyle Group Inc. (Carlyle Group Inc..), some private investment giants have sought to fill the gap at a time of sluggish bank lending.。

Back in March, Apollo Global Management expected private credit to grow more than other businesses as a combination of high interest rates and low liquidity drove demand.。Apollo CEO and co-founder Marc Rowan said: "This is the best entry point for us to get credit because liquidity is drying up.。He said the company focused primarily on "investment-grade" private loans, which account for most of its $400 billion in credit under management.。

Rowan said the current economic environment "is causing spreads to pick up, so it provides a very interesting opportunity for companies like us to allocate capital and credit."。He also said the company's credit business will double in the next five years.。

In addition, BlackRock data shows that yields on direct loans as part of private credit have risen to their highest level since 2016, close to 12%, while yields on U.S. high-yield and investment-grade credit have fallen from recent highs of about 10% and 6%, respectively.。

BlackRock strategists wrote in the report: "Even taking into account declining credit quality, these higher yields may better compensate investors for future risks.。The strategists also said a rising interest rate environment and increased competition for deposits would put pressure on banks and make room for non-bank lending and private credit.。

According to media statistics, global lending (the amount of money banks lend to businesses) fell 37 percent this year and 13 percent in 2022.。

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