Banks and Private Lenders Are Teaming up, and That's Good for Investors

Why It Matters

The bank‑partnered parallel‑lending model gives investors a lower‑risk, more liquid‑aware entry into private credit, mitigating current market stress and preserving portfolio stability.

Key Takeaways

• Private credit faces rising defaults, liquidity pressure, valuation concerns.
• Muzinich's parallel lending co‑invests with banks, reducing exposure risk.
• Strategy targets low‑leverage, senior‑secured first‑lien loans for stability.
• Investors must treat private credit as illiquid, despite evergreen structures.
• Diversified, sector‑defensive portfolios generate natural liquidity without market sales.

Summary

The interview on Livewire Markets explores how banks and private lenders are joining forces through Muzinich’s parallel‑lending model, a strategy that co‑invests alongside banks on low‑leverage, senior‑secured loans. Gianpaolo Pellegrini explains that private credit, after years of strong performance, is now confronting higher defaults, liquidity strain, and valuation uncertainty, especially in over‑exposed sectors like software and AI.

Muzinich differentiates itself by limiting leverage to roughly three‑times EBITDA, applying the same IFRS 9 expected‑loss framework banks use, and creating a credit reserve that stabilises NAVs. The firm emphasizes natural liquidity generated from loan repayments, pre‑payments, and a liquid sleeve, rather than relying on secondary‑market sales. This approach aims to protect investors while delivering steady cash‑pay returns.

Key remarks include: “We co‑invest with banks, sharing risk and using their selection expertise,” and “Private credit is illiquid; evergreen funds only offer limited liquidity windows.” Pellegrini warns against treating these assets like fully liquid funds and stresses disciplined credit selection and robust capital structures as non‑negotiables.

For investors, the partnership model offers a more defensive exposure amid a crowded, high‑leverage market. By aligning with banks, Muzinich provides a buffer against credit deterioration and a clearer liquidity profile, positioning parallel lending as a resilient niche within the broader private‑credit landscape.

Original Description

The world of private credit has grown enormously over the past decade, driven largely by global banks retreating from parts of the lending market following tighter post-GFC regulation. Private credit managers stepped into that gap, providing capital to companies that banks either could not, or would not, finance.

For the most part, banks and private credit managers have operated separately. But a newer model known as “parallel lending” is changing that dynamic. Rather than competing with banks, parallel lenders work alongside them, co-investing in the same loans while helping banks reduce concentration risk on individual deals.

According to Gianpaolo Pellegrini from Muzinich & Co, the approach offers a more conservative way to access private credit at a time when parts of the market are showing signs of strain. In Europe particularly, where corporate lending remains heavily bank-driven, Muzinich believes there is value in partnering with banks rather than competing against them.

“We like to share the risk with the banks because Europe is a very strong bank-centric market and we do not buy fully into the narrative of banks retrenching from good quality clients,” Pellegrini says.

In the interview above, Pellegrini explains where stress is emerging in private credit, why liquidity remains misunderstood, how parallel lending works alongside banks, and the areas of the market Muzinich is actively avoiding right now.

TIME CODES

00:00 – Introduction and the state of private credit

00:38 – Rising defaults, liquidity pressure and market rebalancing

01:29 – Cyclical shift or structural change?

02:18 – Where stress is emerging in private credit

03:07 – How parallel lending works alongside banks

04:27 – Why Muzinich values bank partnership and first lien lending

04:45 – Thinking about valuations and IFRS 9 protections

05:58 – Where parallel lending still offers attractive opportunities

06:57 – The biggest mistake investors are making on liquidity

08:10 – The non-negotiables in portfolio construction

08:51 – What investors should look for in liquidity management

09:50 – Where Muzinich is deploying capital today