17 Jan 2024 1 min read

What does bank retrenchment mean for private credit investors?

By Lushan Sun

How cuts to bank lending could grow the asset class.

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After the 2008 global financial crisis (GFC), more stringent regulations led to banks cutting lending. Our research indicates that banks have remained the principal providers of debt financing, although over the last ten years alternative lenders have made meaningful advances, particularly in infrastructure.

2023 saw a return of bank retrenchment following sharp monetary tightening and the banking crisis in the US. In our view, macroeconomic uncertainty is likely to prolong this situation for some time, meaning private credit could grow significantly as a proportion of the broader capital markets.

In this note, Private Credit Research Manager Lushan Sun outlines her view that global economic uncertainty could prolong this situation for some time – with the potential outcome of private credit growing significantly as a proportion of the broader capital markets.

Click here to read the full article on bank retrenchment

 

Lushan Sun

Private Credit Research Manager

Lushan joined LGIM in 2021 and is responsible for private credit research within our Real Assets division. Prior to LGIM, Lushan was a senior consultant at Mercer, providing advice to UK DB pension schemes on asset allocation, portfolio construction and manager selection. Lushan has a MSci from Imperial College in Chemistry and is a Fellow of the Institute and Faculty of Actuaries. Outside work she spends most of her time pursuing her passion for food, exercise and the latest foreign dramas on Netflix.

Lushan Sun