Blackstone's Michael Zawadzki on How Private Credit Got so Big
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Why has private credit grown so dramatically over the past two decades?
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Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.
And I'm Joe Weisenthal.
Joe, I keep thinking about that Sam Altman hype cycle kind of phrase, the whole it's over and then we're so bad thing. And obviously he was talking about AI and how people, you know, feel about AI, but I think you could apply it to a bunch of different markets at the moment. So AI, obviously, but also private credit.
Totally.
Think back to the end of last year, right? We had all the JP Morgan, Jamie Diamonds, proverbial cockroaches emerging from private credit and people started to get really worried. Fast forward to January twenty twenty six. And a lot of those concerns seem to have faded into the background.
Right, you wrote that thing, right? Like spreads everywhere are super tight. And already we know that the uh the stock market's up for the year, but credit market's off to a very strong start of all flavors, from what I understand.
Right. Stock markets stealing all the spotlight. But if you look at the corporate bond market, now this is the public bond market, not private, but spreads are, you know, at basically historic tights. I think the uh the high yield index is starting at its like tightest level ever in the history of the index for the year. This is crazy, but it also highlights an important point, which is that spreads and returns are all relative.
Yeah.
Right. And so if the public market is absolutely booming, that could be a good thing for private credit, but also private credit competes with the public market, right? So if you're getting pretty good returns in public credit or leveraged loans, something like that, maybe you're not going into private credit as much as you used to.
What if you found a house that just had one cockroach? That would be could you imagine There's never
one cockroach? Cockroach, That's the
that's the point. There had to have been a first cockroach that enters the house. You get it really quickly in your uh and then you don't have a cockroach problem.
Did I ever tell you I hate cockroaches so much? That first of all, the first Japanese word I ever relearned when I moved back to Japan as like a 14-year-old was Goki Bori Hoyhoi, because I had to go down to the local convenient, the convenience store. and buy cockroach hotels because the entire apartment was infested. And secondly, I hate cockroaches so much. I once uh read an entire book about cockroaches just to know my enemy.
Wow.
It was like three hundred pages on cockroaches. Should we get
the author on the podcast?
Ugh. It was actually a really good book. It was a sort of like cultural and scientific study of the history of cockroaches. But anyway, we are getting massively off topic. Shall I introduce our guest? We do, in fact, have the perfect guest. All right. So we're going to be talking all things private credit, including how private credit is relating to the AI space at the moment. We're speaking with Michael Zawatsky, also known as Zee. He is the Global Chief Investment Officer for Blackstone Credit and Insurance. So, Z, thank you so much for coming on the podcast.
Wonderful to be here. Thanks for having me.
So I am told by your uh lovely Blackstone representatives that over the last twenty years you have grown Blackstone's credit franchise into the largest business by assets at Blackstone. How hard was that? Were you just sort of like riding a wave of corporate issuance? Well
Let's talk about a few things that have happened here. You know, I often get asked about this growth of private credit, and I think there's a misconception that that growth was driven by excess risk taking.
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Chapters
8 chapters
1
Why has private credit grown so dramatically over the past two decades?
0:00–7:42
2
How does the “farm‑to‑table” analogy explain the private‑credit business model?
7:42–14:24
3
What role does private credit play in financing AI‑related data‑center infrastructure?
14:24–21:24
4
Why are insurers such important partners for Blackstone’s private‑credit franchise?
21:24–29:32
5
How is Blackstone sourcing deals in a competitive private‑credit market?
29:32–39:15
6
What are the expectations for spreads and performance of private credit in the coming years?
39:15–44:47
7
How is generative AI being used to improve efficiency and decision‑making in private credit?
44:47–50:10
8
What skills and qualities does Blackstone look for when hiring new private‑credit talent?
50:10–53:17
Speakers
4 identifiedMore from Odd Lots
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