KBRA Releases Research – Private Credit: KBRA-Rated Private Equity and Private Credit Firms Demonstrate Resilience Through Market Challenges

NEW YORK--(BUSINESS WIRE)--
KBRA releases a research report examining the resilience of its rated private equity (PE) and private credit (PC) firms.

Amid ongoing trade tensions, tariffs, market volatility, and a possible economic slowdown, KBRA views alternative asset managers—particularly those geared toward PE and PC—as more resilient on average than other types of financial institutions. This resilience is primarily underpinned by a fee-based business model that ensures more stable and predictable revenue streams, as well as low liquidity needs, enabling such firms to better navigate more challenging conditions. Management fees tied to committed capital or invested capital at cost provide a cushion during periods of market stress or valuation adjustments. A flexible cost base adds to these firms’ resiliency.

Should trade tensions or broader geopolitical risks evolve into a protracted economic slowdown, asset managers will face potential headwinds, including delays in portfolio company exits, valuation pressures at the fund level, and a more difficult fundraising landscape. A contraction in deal activity and tightening credit conditions could also weigh on performance fee income over time. Still, firms with substantial dry powder (unallocated committed capital) are well positioned to take advantage of market dislocation. These managers can deploy capital at more attractive valuations and spreads during periods of stress, potentially enhancing long-term returns. Moreover, experienced managers with diversified strategies, strong limited partner (LP) relationships, and proven track records may continue to attract capital, albeit at a more measured pace.

KBRA currently rates 59 asset managers, primarily focused on sector-diversified PE and PC strategies. The portfolio also includes managers with dedicated strategies in real estate, infrastructure, and energy, as well as more traditional wealth management firms. This diverse coverage provides KBRA with a broad industry view. The bulk of KBRA ratings are unpublished and were assigned in connection with privately placed debt transactions exceeding $29 billion, primarily in the U.S. but with nearly $8 billion linked to European asset managers.

Click here to view the report.

Related Publications

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• Private Credit: KBRA-Rated Private Equity and Private Credit Firms Remain Resilient Despite Challenging Environment
• European Private Credit: Growing Source of Funding
• 2023 Financial Institutions Sector Outlook: Private Equity and Private Credit Asset Managers Enjoy Relative Resilience

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1010086

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Source: Kroll Bond Rating Agency, LLC