Banks' core holdings now lie within the realm of alternative credit. These assets may be on the fire sale soon. Banks are forced to realign their asset portfolios towards shorter duration and more liquid securities. As a result, they are disposing of certain illiquid, long-duration asset classes such as commercial real estate loans. Private credit has the opportunity to offer financing for these assets .
New bank capital regulations and deposit funding constraints will likely force banks to shrink their lending activities over time. Private credit can help fill the void, especially for middle-market and small-business borrowers who rely more on regional and community banks.
The ongoing credit contraction drives the non-bank lending sector's significant restructuring and consolidation. As banks retreat from certain assets and sectors, it presents a treasure trove of opportunities for astute private credit managers.
As banks withdraw, they leave behind a wealth of asset-focused alternative credit investments. This represents a game-changer for private credit managers with adaptable capital and scale.
You can also access the link to the Ares Management’s newsletter here: https://www.aresmgmt.com/our-business/credit/alternative-credit