David Hunt, chief executive of PGIM, said that the private credit market is maturing, particularly within the direct lending segment.

However, he warned that a “shakeout” is on the horizon after noticing that institutional investors are becoming much more picky about the funds that they choose to back.

In an interview with Bloomberg TV, Hunt said that he is seeing fewer managers raising more money from a smaller pool of institutional investors. These investors are looking for managers who have longer track records and a lot of experience in the market.

“Your ability to just set up a new shop and raise money is a lot less now than it was three years ago,” said Hunt.

“There will be a bit of a shakeout in that — and that is no bad thing.”

Read more: Private credit’s returns attract investors and asset managers alike

Hunt added that private credit is a stand out segment within private markets at the moment, with direct lending and asset-based finance seeing particular growth.

He said that PGIM expects the direct lending and asset-based finance markets to keep growing as banks rein in lending to comply with more stringent capital requirements, sending more deals into the private market space.

Earlier this year PGIM Private Capital’s senior managing director Matt Douglass said that he expects the asset manager’s origination pace to be strong in 2024 as the demand for private credit continues to soar.

Read more: PGIM to invest “significant dollars” in private alternatives