Private credit is fast growing, and will take market share away from the public leveraged finance markets, Blue Owl’s co-president Craig Packer told host Lisa Lee on the Credit Exchange podcast. The direct lending segment that competes with leveraged loans and high-yield bonds will become 45%, maybe as much as 50%, of the leveraged finance market over a five year period.

That’s raising questions about the asset class – is there too much money chasing after financing deals, why are there vast differences in valuation among private credit shops, is it okay that there’s more payment-in-kind loans, how will it perform in an economic downturn.

Packer, who co-founded the predecessor firm to Blue Owl’s Credit platform and was instrumental in shaping the modern private credit market, tackles these questions and explains why he is optimistic about the performance of private credit.