Private Credit: Real Yields vs Artificial Intelligence

In this session Aaron Mulvihill (JP Morgan Asset Management) explores current developments in private credit markets, alongside the growing interaction between credit markets and AI-related investment activity. You can download the Guide to Alternatives from J.P. Morgan here.

Key insights

• Continued allocation to private credit
  Private credit remains one of the most allocated asset classes within alternatives, with institutional investors continuing to plan increased allocations.
• Challenges in traditional portfolios
  The discussion highlights pressure on income generation, including the decline in nominal and real yields and changing correlations between stocks and bonds.
• Role in portfolio construction
  Private credit is positioned as a diversifier, with floating rate structures helping to reduce duration risk and lower correlation with public markets.
• Yield trends and competition
  Yields have declined in part due to lower interest rates and increased competition, although private credit continues to offer a premium to traditional credit markets.
• Credit quality signals
  Default rates remain relatively low, but there is increased monitoring of factors such as payment-in-kind structures and restructuring activity.
• AI and debt markets
  Significant investment in AI infrastructure is driving increased borrowing activity, with growth in both traditional credit and private debt issuance linked to data center and related infrastructure.