The investment giant Blackstone Group has admitted that the era of “bumper” returns from private credit lending is over, signaling a turning point in a market that surged during the high-rate environment of recent years. According to President Jonathan Gray, the once-rich returns of “mid-teens” in senior floating rate private debt have given way to more modest outcomes as base rates and credit spreads have come down.
In the sharp interest-rate increase between 2022 and late 2024, many private-credit lenders benefited from floating-rate loans re-pricing higher and strong demand for non-bank lending. Now, with central banks cutting rates and spreads narrowing, Blackstone says the “excess return” that accompanied that cycle has come to an end.
The change might mean recalibrating expectations. A fund level return of 10% for private credit is still ahead of many public credit markets, but is a far cry from the 15-20% plus that attracted large inflows in the boom years. Meanwhile, sources such as investment consultant GIC have begun signalling heightened caution around the market, citing compressed yields and a lack of experience of private credit downturns.
While Blackstone continues to raise capital into its credit and insurance business, with assets under management (AUM) now exceeding $400 billion, it remains bullish on deal-flow and disciplined underwriting. But the adjustment underscores that the “easy money” phase for private lending is likely behind us. Going forward, managers and investors must focus more on selectiveness, borrower quality, amortisation structures and downside protection rather than relying on structural yield tailwinds.
