Moody's and the Rise of Private Credit: A Strategic Opportunity for Long-Term Investors

The private credit market is undergoing a seismic transformation, driven by a confluence of factors: shifting global liquidity dynamics, the rise of institutional capital seeking alternative yields, and the urgent demand for innovative financing solutions in sectors like AI infrastructure and energy transition. At the heart of this evolution is Moody's (MCO), a company that has strategically repositioned itself as a critical enabler of transparency, risk management, and growth in this fast-expanding asset class. For long-term investors, Moody's represents not just a beneficiary of the private credit boom but a masterclass in how to leverage technological innovation and strategic partnerships to dominate a high-growth sector.

The $3 Trillion Opportunity: Why Private Credit is a Must-Watch

Moody's has projected that global private credit assets under management (AUM) will surge to $3 trillion by 2028, a trajectory fueled by low-interest-rate environments, regulatory tailwinds, and the structural underinvestment in infrastructure and technology. This growth is not speculative—it's being driven by tangible demand. For example, private credit funds now account for over 50% of new loan issuance in the U.S., as traditional banks retreat from middle-market lending.

What's remarkable is how Moody's has positioned itself to profit from this shift. In Q2 2025 alone, private credit-related revenue surged 75% across Moody's Investors Service (MIS) lines of business, even as broader issuance declined by 12%. This outperformance underscores the company's ability to monetize its expertise in a market where transparency and independent credit analysis are becoming table stakes.

Moody's Strategic Arsenal: Ratings, AI, and Partnerships

1. Enhanced Ratings and Risk Assessment
Moody's has deepened its role as a trusted arbiter of credit risk by expanding its coverage of private debt instruments. The firm now provides ratings for over 10,000 private credit entities, including non-bank lenders, private debt funds, and specialty finance platforms. This is particularly valuable in a market where borrowers lack the public disclosures of traditional issuers.

2. AI-Driven Analytics: A Game Changer
The integration of generative AI (GenAI) into Moody's Analytics (MA) product suite has been a masterstroke. By Q2 2025, 40% of MA's revenue streams by ARR included GenAI capabilities, enabling faster, more granular risk modeling and scenario analysis. For instance, Moody's Research Assistant—a GenAI-powered tool—can generate implied credit ratings for private companies in seconds, a process that previously took weeks. This not only accelerates decision-making for asset managers but also creates a moat around Moody's data ecosystem.

3. Strategic Partnerships: Expanding the Data Network
Moody's has forged alliances with tech giants and data platforms to broaden its reach. Notable partnerships include:
- MSCI: Providing third-party credit scores for thousands of private credit entities, enhancing workflow efficiency for asset managers.
- SAP and Databricks: Integrating Moody's risk data into enterprise platforms, opening new revenue streams and distribution channels.
- Microsoft: Supplying hierarchical and organizational data for supply chain and KYC functions, tapping into the AI-driven compliance boom.

These partnerships are not just incremental—they're structural. By embedding its data into the infrastructure of global enterprises, Moody's is ensuring that its credit insights become indispensable for risk management and investment decisions.

The Long-Term Investment Thesis

For investors, the case for Moody's hinges on three pillars: market leadership, technological differentiation, and recurring revenue potential.

• Market Leadership: Moody's dominates a niche that is growing at a 20%+ CAGR. Its 30%+ year-over-year increase in Latin America mandates (post-ICR Chile acquisition) and 50%+ surge in private credit deals demonstrate its ability to scale in high-growth regions and sectors.
• Technological Differentiation: The GenAI integration is a defensible advantage. With GenAI-adopter customers growing at twice the rate of the broader MA segment, Moody's is capturing value from the AI revolution.
• Recurring Revenue: Moody's Analytics now generates $1.5 billion in ARR, with GenAI and AI data center investments driving consistent renewals. This sticky revenue model insulates the company from cyclical credit market volatility.

Risks and Mitigants

While the private credit market is ripe with opportunity, it's not without risks. Regulatory scrutiny of non-traditional lenders could tighten, and the lack of historical data on private credit's performance during downturns remains a concern. Moody's, however, is proactively addressing these challenges by advocating for standardized risk frameworks and investing in predictive modeling tools that simulate economic stress scenarios.

Conclusion: A High-Conviction Bet on the Future of Credit

Moody's is not merely a ratings agency—it's a data and analytics powerhouse that is redefining how credit risk is assessed and managed. By aligning with the private credit boom through AI, partnerships, and localized expertise, the company is capturing a disproportionate share of the market's growth. For long-term investors, this represents a compelling opportunity to bet on the infrastructure of the new credit economy. As private credit AUM nears $3 trillion, Moody's is poised to remain at the forefront, offering both defensive resilience and offensive growth potential.