2023 was characterized by several key themes in the capital markets. The Fed’s battle against inflation, the resulting impact on issuers of higher for-longer interest rates, a much slower M&A pace as buyers and sellers deal with mounting borrowing costs and compressed equity returns, and the steady disintermediation of buyout financings from public to private credit.

These dynamics have put private credit in the spotlight, not only for market participants, but regulators and the media. The latter two categories, for various reasons, struggles with how private credit has expanded in popularity with both issuers and investors. They attribute “growth” with “risk.” But as one asset manager put it, “mistaken pattern recognition leads some to attribute the historic behavior of public credit under stress with future private credit performance.”

For the year ahead we’ve identified four trends emerging from current dynamics that will impact deal making and fundraising. These trends reflect the complexity of capital formation and the nuances of asset management. But they also illuminate less well understood features of private credit. Understanding them will help dispel persistent myths that distort the realities of how today’s credit markets function.