Private Credit Growing Despite Uncertainty... Blue Owl Forecasts a Positive Second Half Outlook

Blue Owl Releases Report on Private Credit Markets
200bp Yield Premium Maintained Over Syndicated Loans
Long-Term Growth Trajectory Intact Despite M&A Slowdown

Despite macroeconomic uncertainty and market volatility, private credit markets continue to retain their investment attractiveness, according to a new analysis. Although concerns once swelled over the impact of artificial intelligence (AI) proliferation on software companies' business models, the market is now increasingly revaluing companies that possess sustainable competitive advantages and technological moats.

On August 20, the global alternative investment manager Blue Owl Capital released its "Second Half 2026 Outlook" report. In the report, Blue Owl Capital diagnosed that despite macroeconomic uncertainty, structural growth within private markets continues, led by private credit and real assets. While investor sentiment was shaken by concerns over credit soundness and market volatility, the private credit asset class largely delivered results that were in line with expectations.

Even amid a general tightening in credit spreads, the direct lending market maintained a yield premium of about 200 basis points (bp; 1 bp = 0.01%) over syndicated loans on average. Early this year, investors' attention briefly focused on the far-reaching effects of AI on software business models. However, the market has since come to revalue companies based on their "economic moat."

The default rate for direct lending borrowers was also approximately 2.0%, below the historical average of 2.7%. Blue Owl Capital emphasized that even if default rates were to rise, portfolios that are highly diversified at scale are designed to absorb volatility at the individual borrower level. The size and diversification effect of institutional-grade private credit platforms can serve as a buffer during stressed market phases.

Blue Owl Capital forecast that the long-term growth trend of the direct lending market would remain robust. Although M&A market uncertainty caused a temporary slowdown in deal activity during the first half of this year, direct lending now accounts for about 25% of the overall leveraged credit market. This share is expected to rise to 30% by the early 2030s. In addition, Blue Owl Capital projected that growth in direct lending will accelerate as the market environment stabilizes and deal flow recovers.

Investor demand for diversification beyond traditional direct lending is also growing. Blue Owl Capital presented asset-based finance (ABF) as a complementary strategy to direct lending. The ABF structure does not rely on the creditworthiness of a specific consumer or individual borrower; instead, it consists of thousands to tens of thousands of diversified, individual receivables. While the potential size of the ABF market—which covers consumer credit, small business loans, equipment leases, and specialty assets—exceeds $13.5 trillion, assets under management by dedicated managers remain just above $500 billion. Blue Owl Capital sees this market as still significantly underdeveloped and believes there are opportunities for large managers with differentiated sourcing capabilities, dedicated capital, and long-term industry relationships. Blue Owl Capital explained, "ABF can generate returns that complement direct lending, and provide diversification benefits throughout the entire economic cycle."

The report also highlighted "Net Lease" for the real asset segment. A net lease structure requires tenants to bear all or part of the costs for property taxes, insurance, and maintenance, in addition to the base monthly rent. Blue Owl Capital emphasized that sale-and-leaseback transactions, in particular, have become a core financing tool for companies seeking greater financial flexibility. However, the firm noted that not all net lease assets are promising. Blue Owl Capital stressed the importance of selectively targeting assets that are supported by structural demand, have high replacement costs, and are essential to the tenant’s business operations, citing cold storage, healthcare facilities, and data centers as key examples.

This content was produced with the assistance of AI translation services.