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Veteran investor Howard Marks said he doesn’t see a widespread problem brewing in private credit, but warned that the sector’s rapid expansion over the past 15 years could expose weaker lenders when markets eventually turn.
“There’s not a systemic problem with private credit,” Marks, co-chairman and co-founder of Oaktree Capital, said Thursday on CNBC’s “Money Movers.”
The noted investor said that the risk stems from the pace of expansion in direct lending, which has ballooned to a market now exceeding $1 trillion from its early development around 2011.
His comments come as sentiment toward direct lenders has soured following the collapse of auto-related borrowers Tricolor and First Brands. Much of the concern has centered on loans made to software companies as investors worry that artificial intelligence could disrupt those businesses.
