While Wall Street Worries About Rates And Jobs, Ares Sees Something Very Different Happening Inside $1+ Trillion Private Credit Market

Ares Management projects the private credit market may be poised for even greater gains heading into 2026, thanks to diversified deal activity, expanded investor participation, and a broader role in corporate finance, according to its latest Private Credit Outlook 2026 report. As banks continue to pull back from middle-market and bespoke lending, private credit managers are stepping in with scale, flexibility, and speed. These are trends Ares believes will accelerate over the next two years despite fears around sticky inflation and a softening labor market. From Niche To Core Financing Tool Once viewed as a supplemental source of capital, private credit has become a primary financing option for private equity-backed companies and corporate borrowers alike. Ares noted that deal sizes are increasing, underwriting standards remain disciplined, and direct origination continues to support steady deal flow despite macroeconomic uncertainty. The firm said borrowers have generally maintained strong earnings growth, helping private credit portfolios show resilience even amid higher rates and slower economic momentum. Michael Smith, Co-Head of the Ares Credit Group, said, “There’s a narrative around the challenging economic environment, but we’re not seeing it in the performance.” See also: Private Equity Stocks Rally In Sync: Here’s Why Something Big Is Brewing Rates Matter Less Than Structure While market participants are closely watching the direction of interest rates, Ares emphasized that private credit’s appeal extends beyond floating-rate income. Loan spreads, upfront fees, covenant protections, and customized deal terms continue to support attractive risk-adjusted returns compared with public credit markets. This structural advantage, the firm said, helps insulate the asset class from volatility tied to rate cycles. Investor Base Broadens Another key theme in the outlook is the expansion of private credit beyond institutional investors. Wealth channels and individual investors are increasingly gaining access through semi-liquid fund structures, reflecting growing demand for income and diversification outside traditional stock-and-bond portfolios. Private credit has consistently delivered returns 200 to 400 basis points above liquid-credit alternatives such as bank loans and high-yield securities, across multiple rate cycles and economic conditions, according to Ares. Ares’ portfolio companies are demonstrating remarkable resilience, with U.S. holdings showing annualized double-digit earnings growth. Asset managers such as Ares, Blackstone (NYSE:BX), Apollo Global (NYSE:APO), and Blue Owl (NYSE:OWL) have increasingly opened private credit strategies to wealth-management channels through semi-liquid fund structures. Global Uptick Looking ahead to 2026, Ares also sees continued growth opportunities across Europe and Asia, as well as in adjacent strategies such as asset-based finance and secondary markets. "There are good opportunities to take advantage of movements in the markets or fundamental or technical events that allow you to find good risk-adjusted returns in different parts of the world,” said Smith. READ NEXT: All I Want For Christmas Is Not These: 5 Tech Gifts Nobody Asked For Image via Shutterstock