A boom in private credit is spreading quickly across the globe among a broader base of investors.

But after its breakneck growth in recent years, is a correction in private credit on the horizon.

If you take one immediate headwind, which is the prospect of larger and more front load at

hikes, we do see more vulnerabilities potentially on the private side relative to the public

side.

I'm Allison Nathan, and this is exchanges at Coleman Sachs. To help us understand the evolution and the outlook for the world of private credit and

more, I'm sitting down with James Reynolds, Global Cohead of Private Credit within Goldman Sachs Asset Management, and

Lafayette, Chief Credit Strategist and Head of the Credit Research Group in Goldman Sachs

Research.

James Lautfi, welcome to the program.

Thank you for having us.

James, let's start by just talking about what we mean by private credit and this term we

keep hearing about related to it, which is direct lending.

Well, let's start with direct lending, which is basically the fact that you originate a loan or an investment, a debt investment, without the need for an intermediary. I would say if you go back 20, 30 years ago, typically when a corporate

borrower wanted to raise financing, they would go to their banks. And then the banks at that time would club a number of banks together and

then offer the financing. This eventually evolved towards underwriting and syndicating

to the markets and what direct lending has done in the last 10 to 15 years is really putting the borrower directly in discussion with the eventual holder of the debts, right?

And so it's this ability to originate directly to negotiate the terms of that financing directly with the borrower, the terms, the documentation, and the way that basically the debt is going to function for the duration,

which is typically seven or eight years.

So it's that ability to directly land without an intermediary to a borrower.

Why would a company choose to go that route rather than go to a bank?

There are multiple benefits to this. First of all, the banks are not the eventual

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