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Industry Leader Dismisses Bubble Concerns
Lawrence Golub, billionaire founder and CEO of private credit firm Golub Capital, has emphatically dismissed fears that the rapid growth of private credit, specifically direct lending, is leading to a bubble. Speaking at the ninth annual Forbes/SHOOK Top Advisor Summit in Las Vegas, the financial leader argued that direct lending continues to offer investors superior risk-adjusted returns and acts as a necessary hedging tool for traditional portfolios. Golub’s perspective carries significant weight given his firm’s three decades of experience in the financial markets and current management of approximately $75 billion in assets.
The timing of Golub’s comments is particularly relevant as private credit faces increased scrutiny following recent market developments. His firm stance comes amid growing questions about the sector’s stability and long-term viability, making his expert analysis crucial for investors navigating current market conditions.
Substantial Track Record Supports Position
“It’s for sure not a bubble,” Golub declared to a room full of financial advisors. The billionaire—who has a net worth of $3.3 billion according to Forbes—asserted that an allocation to private credit and direct lending significantly improves the risk-adjusted return of traditional 60/40 portfolios. “The returns from direct lending across decades are often better than half of private equity funds,” he noted, highlighting the asset class’s consistent performance history.
Golub’s confidence stems from his firm’s extensive experience, having founded his New York City-based company in 1994 originally as a buyout firm. After the 2000 dotcom bust, he strategically pivoted to lending, a move that has proven prescient given the firm’s current substantial asset base and market position.
Addressing Recent Market Challenges
Golub’s comments arrive at a critical juncture for private credit, with the business facing increased examination following the bankruptcy filing of Ohio auto parts conglomerate First Brands. The company had heavily utilized off-balance-sheet direct loans and currently owes creditors including Jefferies, UBS and Nomura at least $10 billion. This situation has prompted broader questions about lending practices and risk management across the industry.
Despite these challenges, Golub maintains that the asset class’s overall tarnished reputation is “overdone.” He emphasized that premium returns continue for firms that function as skilled operators rather than passive investors, bringing significant information advantages over public markets. This operational approach distinguishes successful private credit firms from traditional investment vehicles.
Market Dynamics and Competitive Landscape
The private credit space has seen substantial capital inflow, with Morgan Stanley reporting approximately $3 trillion committed to the sector at the start of 2025. However, Golub pointed out that increased competition has been heavily concentrated in large, broadly syndicated loan substitute deals. This market bifurcation leaves the core middle market—where Golub Capital focuses—relatively less saturated, preserving opportunities for quality lenders.
“It has seen vastly less competition,” Golub noted, highlighting the strategic advantage of focusing on this market segment. This targeted approach allows specialized firms to maintain their edge despite broader market competition, much like how specialized technology providers maintain their market position through focused expertise.
Performance Metrics and Due Diligence
The billionaire CEO advised investors to focus on net returns after credit losses across market cycles, rather than merely considering loan spreads. “It is net returns after credit losses across the cycle… credit losses or the absence of credit losses drives premium returns over time,” he explained. This perspective underscores that performance ultimately depends on avoiding losses through meticulous due diligence and careful manager selection.
Golub stressed that manager selection is particularly critical in private markets, especially within private credit and direct lending. This emphasis on expertise and careful selection mirrors the approach taken by organizations that maintain their core mission while adapting to market changes.
Strategic Positioning and Client Relationships
Golub advocated for firms that operate as “finance companies” and serve as solution providers, noting that his firm achieves this through 90% repeat business with private equity sponsors. This client retention rate demonstrates the value of building long-term partnerships and providing consistent, reliable service—a approach that benefits both lenders and borrowers.
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Despite recent disappointments in private equity distribution pacing, Golub concluded that the overall asset class’s ability to deliver premium returns remains strongly intact. His positive outlook on the sector’s fundamental strength reflects the same confidence shown by major technology companies making strategic moves to enhance shareholder value.
Broader Economic Impact
“Private equity has been great for the U.S. economy,” Golub stated. “It continues to be great for the U.S. economy.” This endorsement highlights the significant role that private credit and private equity play in supporting business growth, innovation, and economic development across various sectors.
Golub’s comprehensive defense of direct lending provides valuable insights for investors and industry observers alike, offering a seasoned perspective on market dynamics, risk management, and the continuing evolution of private credit as an essential component of modern investment portfolios.
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