Private Credit Braces for Lower Rates — And Lower Returns (1)

The Federal Reserve’s widely expected pivot to lower interest rates next month is creating a conundrum for one of the biggest winners of the high-rate era: private credit.

While easier monetary policy will come as a relief to borrowers with heavy debt loads, it’s also set to sap the returns of an industry that boomed as rates rose.

“Returns generally are going to come down,” said John Cocke, deputy chief investment officer at Corbin Capital Partners. “I believe direct lending is past the golden age.”

That golden age has coincided with the highest interest rates in a generation. Deals ...