Monday 15th September 2025
Private credit’s next frontier: Gary Lin on the unfolding opportunity for advisers
Private credit should not be thought of as a niche satellite allocation, but as a core component of diversified income portfolios.
When Gary Lin, managing director at Blue Owl Capital, beamed into The Inside Network’s recent Investment Leaders Forum in Queenstown from a summer-lit New York, his thesis on direct lending felt less like a technical breakdown and more like an invitation. His core message to financial advisers was clear: private credit is not just another alternative asset class. It is a growing force reshaping corporate financing, offering advisers the chance to access income, resilience and relevance in a changing market.
Private credit, or direct lending, is often misunderstood as niche. Lin’s history lesson quickly dispelled this. He drew a contrast between the “old world” model of local banks lending and holding loans to maturity, and today’s syndicated loan market where risk is spread, diluted and sometimes detached. Direct lending, by contrast, is a return to that relationship-centric approach. Lenders originate loans and hold them to maturity, absorbing the risk and reaping the reward. “We want to be paid back. Our mindset is one of downside mitigation, not chasing a tenfold return,” Lin explained.
Despite its growth, direct lending still represents less than 8 per cent of total US corporate lending, yet the upward trajectory is steep. Over the past decade, private credit has grown dramatically, buoyed by structural and cyclical tailwinds. Advisers, he urged, need to start thinking of it not as a marginal satellite allocation, but as a core component of diversified income portfolios.
One of the biggest catalysts, according to Lin, is the rising tide of companies choosing to stay private. The number of publicly listed firms has dropped 37 per cent since 2000, while the population of private equity-backed companies have surged. “If you’re not looking at private markets, you’re missing a huge part of the economy,” he warned. That private universe is where the economic action increasingly resides, and direct lenders are among the few able to access and price risk in those markets.
Private equity also plays a vital role in this evolution. Lin noted that PE firms are sitting on more than US$2.5 trillion ($3.8 trillion) in dry powder, yet only a fraction of that is matched by private credit capital. “There’s a dramatic supply-demand imbalance,” he said. The ‘L’ in LBO (leveraged buyout) needs debt to work, and increasingly, that debt is being sourced from non-bank lenders like Blue Owl.
The implication for advisers is enormous. Not only is the opportunity set large, it is growing, and the risk-adjusted returns are compelling. Since 2015, direct lending has consistently delivered superior returns relative to high-yield, investment-grade and leveraged loans, with far less volatility. According to Lin, direct lending occupies a rarefied position in portfolio construction: high income, low beta, and negative correlation to fixed-income and equity indices.
Critically, Lin stressed that direct lending is not just about yield. It is about structural resilience. The vast majority of Blue Owl’s portfolio is in senior secured loans, with average loan-to-value ratios (LVRs) of 40 per cent. “Imagine a million-dollar home. We’re lending $400,000 against it. That home would have to lose 60 per cent of its value before we take a hit,” he said. It is an analogy designed to resonate with clients who understand mortgages better than mezzanine finance.
For financial advisers seeking stable income solutions in volatile times, this pitch is timely. Lin suggested that direct lending should be viewed as an “all-weather solution,” not a tactical overweight. The asset class has shown consistent through-cycle returns of 8 to 10 per cent, underpinned by contractual cash flows and tight covenants. In portfolios, its correlation to traditional fixed-income is near zero. “This isn’t just diversification, this is diversification that works,” Lin said.
To bring this to life, Lin shared a recent case study: PCI Pharma Services. In early 2025, Blue Owl refinanced a US$4.5 billion ($6.9 billion) syndicated loan into a private facility. The borrower, backed by Kohlberg & Co., chose Blue Owl’s higher-priced loan over cheaper public market options because of the customisation, certainty and confidentiality it offered. Blue Owl added a “portability” clause to smooth the eventual ownership transition to Bain Capital. That flexibility, Lin argued, is what allows private credit to command a yield premium.
Direct lending is, of course, not a cheap source of capital. It is a bespoke service that offers speed, certainty and discretion. And those qualities are what enable advisers to deliver better outcomes to their clients, particularly in complex family wealth scenarios, inter-generational planning or SMSF strategies where liquidity can be managed.
Lin closed by noting that direct lending is not without risk. But the discipline is built on a mindset of capital preservation, not speculation. “We’re not in the business of hoping the company sells for five times what it’s worth. We’re in the business of getting repaid,” he reiterated. This risk-first philosophy may appeal particularly to clients scarred by volatility in public markets or lured by stable income in a structurally higher interest rate environment.
The takeaway for advisers? Private credit is no longer a peripheral strategy. As clients seek higher income, diversification and downside protection, the case for allocating to private credit within balanced portfolios grows stronger. Advisers who do not incorporate these strategies risk ignoring a critical piece of the modern investment puzzle.
For Blue Owl and its peers, this is only the beginning. As Lin’s data made clear, even with explosive growth, the market remains vastly under-penetrated. For advisers willing to learn and adapt, private credit may become the fixed income equivalent of what private equity was two decades ago: a differentiated, durable and highly demanded strategy.
Laurence Parker-Brown is head of content at The Inside Network and managing editor of The Inside Adviser and Investor Strategy News.
