Long considered lacking in transparency, private credit markets are now becoming increasingly measurable and comparable. At a time when investors are demanding better quality data and greater transparency, StepStone and Kroll have developed proprietary benchmarks for the private credit segment. Their aim is to provide a clearer picture of pricing levels, risks and current performance in this segment. As Jovan Samardzic explains, this initiative clearly illustrates the ongoing evolution of private markets.
Private markets are often described as opaque by nature. How has the level of transparency changed in recent years, particularly in private credit?
Transparency has improved significantly over time, mainly under the impetus of investors. As private credit has become a standard component of strategic allocations, investors have demanded a much clearer understanding of the use of their capital and the performance of the underlying assets.
This improvement can also be attributed to regulatory developments and market transformation. In the US, Business Development Companies - credit vehicles investing in the mid-market, whether listed or not - are required to publish detailed reports to the SEC, offering greater visibility on portfolios, non-accrual rates and Payment-in-Kind components. This does not yet constitute full transparency at the level of individual loans, but it does represent a significant step forward.
In addition, initiatives such as our proprietary benchmarks, developed with Kroll, have provided more structured and timely market information. Importantly, these initiatives have been very well received by the industry. Greater transparency is now seen as a growth driver for the asset class, not a constraint.
Will improved transparency and data quality transform investors' perception of private markets?
Yes, and this trend is already underway. Private credit, in particular, has gone from being a niche - or opportunistic - allocation to becoming a central component of strategic allocations for many institutional investors. This development would not have been possible without significant progress in transparency and data quality.
As allocations increase, investors' requirements evolve. When commitments become significant, they need a much more granular understanding of exposures, portfolio construction, origination standards and performance drivers. More structured data allows for more rigorous due diligence, more robust benchmarks and more continuous monitoring, all of which strengthen investor confidence.
Greater transparency also helps to frame market discussions, shifting them from an often anecdotal reading to a truly fact-based approach. In less transparent environments, isolated credit events can easily distort market perceptions. Broader, more representative data helps to put these events into context and assess their systemic or idiosyncratic nature. This limits overreaction and encourages more rational allocation decisions.
Another key effect is comparability. Better data allows investors to situate private credit in relation to other asset classes, such as syndicated loans or high yield. This comparative framework is essential for portfolio construction and confirms that private markets can now be analysed rigorously.
Throughout the industry, transparency is now seen not as a constraint but as a lever. Most players recognise that better data and greater openness broaden the investor base, deepen the market and support sustainable growth.
What major improvements have you seen in the availability and quality of data?
Ten years ago, data collection was much less institutionalised. Information was often stored in spreadsheets, data sets were incomplete and reporting standards were very heterogeneous.
Today, many GPs have set up genuine reporting systems and dedicated data teams. Investment memos and credit agreements are now systematically digitised and structured.
This development has been largely driven by more stringent due diligence requirements, as allocations have increased. For data aggregators like us, this changes everything. Access is easier, coverage is wider and consistency is much better than it was ten years ago.
What major lessons have you learned from aggregating this data?
Having access to a vast set of data means that we can monitor market trends almost in real time, while putting them into a long-term historical perspective. The compression of spreads in recent years is a good example of this. Thanks to our data, we can track this trend over the last few years, but also over 10 to 15 years, and compare it with other segments such as syndicated loans or high yield.
This perspective is essential for understanding the place of private credit in the overall balance between risk and return.
What was the initial rationale behind the development of the Kroll-StepStone benchmarks?
From the outset, we considered that data had become fundamental to due diligence, portfolio construction and understanding the asset class. Over time, we built up a very large internal database and identified a number of market shortcomings: insufficient transparency, observations that were often anecdotal rather than data-driven, lack of speed and limited representativeness - particularly in Europe.
It was against this backdrop that we began discussions with Kroll, which also collects a significant volume of data through its valuation activities. Together, we developed these proprietary benchmarks to provide a broader, faster and more fundamentally-focused view of the market.
Does the data you process challenge certain preconceived ideas?
If anything, it confirms the fundamental characteristics of the asset class. Private credit, and more specifically direct lending, remains a robust asset class, composed mainly of senior secured loans, positioned at the top of the capital structure. Returns come primarily from coupon income, not capital appreciation. The investment rationale is based on income generation and downside protection. This profile has not changed structurally.
How broad is your research universe?
Within StepStone portfolios, we are invested in over 1,500 credits. As part of the Kroll-StepStone benchmarks, we monitor more than 3,000 loans on an ongoing basis. Historically, our database has covered more than 16,000 loans since 2010-2011, with a rare degree of representativeness, both in the United States and in Europe.
What is the typical profile of companies financed today?
The core of the market is in the mid-market, with companies generating between $25 million and $75 million in EBITDA. Average leverage is around 5 times EBITDA. EBITDA margins generally range from 15% to 30%, with a median of around 20%. Interest cover ratios are currently around 2.25. Around 90% of borrowers are owned by private equity funds. Overall, the fundamental profile of borrowers has remained stable.