Private credit losing ground in fight for family office riches

It is the hottest trade on Wall Street.

Everywhere you turn, money managers have upped their investments in private credit, helping the asset class balloon into a US$1.7 trillion (S$2.22 trillion) industry. But there is one group where interest appears to already be waning - the family office.

Managers of the fortunes of the world's ultra-wealthy are searching out private credit funds at a slower pace in 2024 than 2023, according to the latest data from Preqin, an analytics company that tracks the alternative investment industry.

It bodes ill for direct lenders that are relying on the trillions of dollars that family offices oversee to propel the industry's next growth phase. Amid a difficult fund-raising environment in 2024, private credit funds have ramped up efforts to lure the world's richest individuals. Still, overall family office allocations to private debt remain at roughly 2 per cent, according to a recent report from UBS Group.

"We don't need to invest through the sort of generic private credit fund managers," said Ms Grace Cheung, chief investment officer and founder of TGIM Assets Capital, a private markets investment group with capital allocations from family offices.

"We have the resources, expertise and network to do a lot of private credit-type transactions ourselves," she said, adding that they sometimes co-invest alongside established private credit firms.