Goldman Sachs has published a detailed assessment of the private credit market, arguing that recent volatility around retail-focused business development companies (BDCs) has obscured a more important and underappreciated story: the asset class's structural role in corporate financing remains intact and is likely to expand.
The note, written by the bank's credit strategy research team, draws a clear distinction between the retail BDC segment, which has attracted most of the recent attention, and the institutional capital that makes up the bulk of private credit assets under management globally.
The bank's central argument is that the private credit market is not oversized relative to other financing channels and that meaningful scope for further growth exists, particularly outside the United States, where bank lending still dominates corporate funding to a far greater degree than it does in North America.
Goldman points to the sheer scale of privately held companies as the foundation for this view, noting that 63% of US firms with at least $100 million in annual revenue are private.
The proportion is even higher in the European Union and UK, and the aggregate annual revenue generated by private firms across all three regions totals nearly $12 trillion.
A key structural argument in the note concerns the growing average deal size in syndicated credit markets, which Goldman says has effectively raised the minimum viable size for companies seeking to access leveraged loan or high yield bond markets.
With the average high-yield bond deal size running at $791 million between 2022 and 2025, smaller companies seeking more modest amounts of debt financing increasingly find the syndicated markets unsuitable, reinforcing the financing role played by private credit for middle-market borrowers.
The bank also addresses the growing fluidity between private and syndicated markets, documenting 97 so-called private market steals from the USD leveraged loan market since late 2021.
This totalled $139 billion in refinancing volume, and arguing that this two-way flow of borrowers between the channels undermines the narrative that companies use private credit only when no alternative is available.
The rise of jumbo private credit loans, defined as deals of $1 billion or more, has further expanded the addressable market, allowing private lenders to compete for borrowers that historically would have accessed the syndicated markets.
On performance, Goldman points to data from the Cliffwater Direct Lending Index (CDLI), an asset-weighted index covering more than 21,000 US middle market loans.
This shows that private credit outpaced both the USD high yield bond and leveraged loan indices in 15 of the last 21 years, with realised losses for 2025 running at 64 basis points, below the long-run historical average of 100 basis points.
The note describes key fundamental metrics, including payment-in-kind activity and non-accrual rates, as range-bound rather than deteriorating, while flagging the macroeconomic growth backdrop as the key variable to watch in validating the low loss rates seen to date.
On the much-discussed question of software and technology sector concentration, Goldman notes that both private credit and the broadly syndicated leveraged loan market carry large weightings to the sector, meaning that any AI-related disruption to private credit portfolios would almost certainly affect syndicated markets equally.