Private Credit And The Coming Inflation

 

If inflation goes up due to the current geopolitics, the Federal Reserve will most likely raise rates.

Other global central banks like the European Central Bank will follow.

The higher interest rates will hit the lending portfolios of the leading private equity and private credit asset managers Blackstone, KKR, BlackRock, Carlyle, Apollo, Ares, Blue Owl, EQT, Partners Group etc. by driving down the AI technology companies' valuations and hampering their ability to service the high interest rate private credit loans. Leveraged buyouts of technology companies will suffer as the AI companies will face difficulties servicing their debt.

The private equity, private credit industry will weather the shock if the current AI boom does not turn into a bust defined by a fall in the Nasdaq Composite of 62 % or more. If the inflation shock causes a global economic crisis, the Nasdaq Composite can fall more than 62 % and the private credit industry will face solvency problems, according to Wolfteam Ltd.'s projections and estimates.

Otherwise, the current inflation shock will be absorbed via large, multi billion private credit loans write offs.