GCC Private Credit Partnerships Rise Amid Tariff Uncertainty
Tariff Volatility Sparks Private Credit Interest
Recent US trade tariffs caused market volatility, but private credit gained appeal in the GCC. Asset managers evaluate tariff impacts, with senior secured lending viewed as a safer investment option. Richard Miller of TCW called the tariffs “not helpful,” emphasizing uncertainty’s threat to economic growth. Despite delays in some tariffs, investor concerns remain, pushing interest toward secure credit assets.
GCC Sovereigns Increase Focus on Private Credit
Mubadala announced a $1 billion private credit partnership with US-based Fortress in 2024. The move signals the GCC’s growing preference for asset-based lending during global economic shifts. Wael Younan from TCW said discussions with sovereign wealth funds on private credit are increasing. More asset managers now dedicate teams to private credit within strategic long-term plans in the region.
Shift From Equities to Fixed Income and Credit
Volatile equities drove investors to reallocate funds into fixed income and private credit options. Dan Farley of SSGA highlighted the value of fixed income and gold as strong diversifiers. He noted parallels to Trump-era uncertainty, which similarly disrupted markets and required tactical shifts. SSGA reduced equity exposure and moved toward fixed income in reaction to rising trade tensions.
Economic Risks Impact GCC Outlook
Moody’s downgraded the US credit rating and warned of risks to GCC economic growth. Tariff-related slowdowns could hurt oil prices, reducing government spending across GCC economies. Moody’s said MENA banks may face margin compression and sluggish lending in weaker growth environments. Real estate demand in the UAE could fall if global economic activity significantly declines.
Private Credit Becomes Strategic for the GCC
Despite risks, private credit offers attractive yields and relatively stable risk compared to public markets.
Sovereigns seek to rebalance portfolios, using private credit to enhance returns and preserve liquidity.
Asset managers emphasize careful selection, highlighting quality as key in GCC credit partnerships.
As volatility persists, GCC nations strengthen ties with managers for long-term private credit growth.