With significant contributions from advisors and alternative-enthused clients and investors, demand for private credit investments is soaring. Many expect that theme to continue this year.
Fortunately, access to private credit — previously one of the long-standing hurdles — is increasing. Exchange traded funds are a big reason why. The WisdomTree Alternative Income Fund (HYIN), which turns four years old in May, is among the options advisors and investors have for accessing alternative credit via the ETF wrapper.
HYIN sports a 30-day SEC yield of 11% and that’s eye-catching in its own right. But there are other reasons to believe the ETF could increasingly appear on asset allocators’ radars this year.
“The size and scope of the global private credit markets will continue to grow rapidly this [year. They will be] spurred by lower interest rates, declining default risk and solid economic strength, led by the US and Europe. Global private credit [AUM] will jump to $3 trillion by [2028. That reflects] greater momentum than in the past two years,” noted Moody’s Investors Service.
HYIN Has Tailwinds
Over the course of this year, it’s possible that multiple tailwinds will emerge for the private credit market. That includes the Trump administration potentially taking a more sanguine view of regulations regarding the asset class. That could compel advisors and retail investors to consider HYIN.
“The US regulatory approach toward the US private credit market will likely change during the second Trump [administration. That is because priorities shifting] from an emphasis on enhanced disclosure requirements to reassessing the existing regulatory framework with a focus on capital formation,” added Moody’s.
The high yields offered by private credit are a clear selling point. But there’s more to the story.
Additional Potential Private Credit Catalyst
“Retail private debt AUM has been [accelerating. That’s] still less than 20% of total private debt [AUM. But it’s] growing more quickly than institutional AUM,” observed Moody’s. “To access this newer [base, some managers] are coming to market with evergreen [funds. Others are] rolling out first-ever private credit Exchange Traded Funds.”
Another potential catalyst for private credit in 2025 and going forward is broadening adoption of the asset class among professional market participants. Those include banks and insurance companies. The latter typically invest for the long term and need to source significant amounts of income.
“Synergies between insurance companies and alternative managers will [grow. But] it will be essential to monitor risks, especially credit and asset-liability mismatch (ALM) risks,” concluded Moody’s.
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