Private credit has solidified its role as a dominant investment strategy, second only to private equity (PE). In 2024 alone, global private debt fundraising reached $197.1 billion, surpassing venture capital for the second consecutive year, per Pitchbook. Investors favor this asset class due to its ability to generate steady income and deliver high-risk-adjusted returns.
Figure 1: Private Debt Fundraising Over the Years
Source: PitchBook, data as of December 31, 2024
Retail and Insurance Investors Driving Growth in Private Credit
Institutional investors remained dominant in 2024, contributing significantly to sustained growth. Notably, perpetual-life vehicles, which differ from traditional finite-life funds, are becoming increasingly popular among insurance companies and private wealth investors. According to Pitchbook, these funds have captured about half of the recent inflows, underscoring the broader industry's shift towards more flexible investment models that promise continuous value creation without traditional drawdowns.
Insurance businesses have increasingly allied with private credit firms to manage their assets effectively. The partnership suits insurers' long-term investment horizons, aligning perfectly with private credit strategies that offer stable and predictable returns. CVC raised over €15 billion (around $16.36 billion) from insurance clients in the last five years, demonstrating insurers' growing appetite to leverage private markets' capabilities to meet their asset management needs and enhance portfolio stability.
Figure 2: Fundraising by Top 7 Public US Alternative Asset Managers by Channel in 2024
Source: PitchBook, data as of December 31, 2024
Strategic Alliances and Expansion by Asset Managers
Alternative asset managers are acknowledging the increasing dominance of private credit. Firms like CVC Capital Partners actively seek expansion opportunities in the US private credit space. CEO Rob Lucas identified private credit and insurance sectors as pivotal growth areas. CVC had shown interest in major firms like Fortress Investment Corp. and previously pursued HPS Investment Partners before its acquisition by BlackRock. Such moves underscore the industry's ongoing consolidation and the strategic importance placed on acquiring robust private credit capabilities.
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Strategic partnerships between private credit firms and banks emerged as key market features, enhancing deal flow and liquidity. In October 2024, JPMorgan Chase announced it would let select private credit lenders co-invest in its deals for fees. Other notable collaborations include Citi’s $25 billion partnership with Apollo and Wells Fargo’s $5 billion tie-up with Centerbridge Partners. These alliances reflect efforts to provide integrated solutions to borrowers and maintain rational pricing, highlighting an innovative shift towards collaborative rather than purely competitive market behavior.
These partnerships would benefit emerging managers as it has increasingly become difficult to compete with established private debt managers. According to PitchBook, in 2024, fundraising by newer managers accounted for just 6%, highlighting the significant barriers to entry. Experienced platforms offer investors extensive sourcing capabilities, which are critical in a market increasingly concerned with asset acquisition. This dynamic strengthens established players' dominance, allowing them to leverage broader networks and longstanding relationships amid intense competition.
Investor Appetite Remains Strong Amid Increased Dry Powder
The growth of private credit has significantly increased dry powder, reaching a record $566.8 billion by mid-2024, as per PitchBook. This accumulated dry powder underscores strong investor commitment to the asset class. However, experts anticipate potential declines in available capital reserves if PE deal-making rebounds, further intensifying demand. This abundance of dry powder positions private credit to swiftly capitalize on renewed deal activity, reinforcing its strategic importance within broader financial markets.
Recent fund closures underscore robust investor demand for private credit strategies amid ongoing market volatility and the search for higher returns. On March 3, 2025, Northleaf Capital Partners announced the successful close of its NPC III fund, raising over $1 billion with a strategic focus on mid-market lending to PE-backed companies. Similarly, Invesco Private Credit closed its flagship Invesco Direct Lending Fund II in February, securing a combined total of $1.4 billion in investable capital, including related investment vehicles designed to target direct lending opportunities.
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Projected Growth Fueled by Favorable Market Conditions
Amidst this growing frenzy for private credit among alternative asset managers, Moody’s predicts rapid expansion in private credit markets, forecasting global assets under management (AUM) to reach $3 trillion by 2028, driven by reduced interest rates, declining default risks, and strong economic performance, particularly in the US and Europe. Such favorable macroeconomic factors bolster investor confidence and encourage further capital flows into private credit, positioning it as a resilient and attractive asset class amid economic fluctuations.
Finally, as traditional banking steps back, private credit firms are increasingly filling financing gaps, notably in direct lending. AUM growth is driven by robust investor appetite for floating-rate debt amidst higher interest rates. Although lower rates might temper enthusiasm in the future, structural shifts in financing markets, including sustained demand from middle-market companies and prolonged private company statuses, ensure continued private credit expansion and market relevance in the coming years.
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