Trends impacting private credit

Private credit trends in 2025

Today, private credit stands as one of the fastest-growing areas in global finance, having surpassed  $3 trillion in assets under management according to Macquarie. As we cross the halfway point of 2025, private credit continues to reshape public debt markets and is poised for further acceleration.

Private credit is moving from a niche yield play to a foundational component of corporate finance, investment portfolios, and capital market structure. Below are the most critical trends shaping this market today.

‍

1. Private credit is a permanent fixture in lending markets

The origins of the modern private credit boom trace back to post-2008 regulation, when banks retrenched from non-investment grade lending. That structural dislocation created a white space that private lenders, particularly in the middle market, have filled with speed, flexibility, and customized deal structures.

Today, private credit is often the preferred solution for borrowers seeking certainty in volatile environments. According to Macquarie, up to 40% of their private credit transactions in Europe now stem from repeat borrowers.  

2. Middle market PE-backed deals continue to drive volume

Private equity sponsors continue to be the primary engine behind private credit deal flow. The convergence of PE and private credit is deepening, with many sponsors building in-house credit teams or partnering with lenders for customized capital stacks.

Despite higher interest rates, sponsored middle market activity remained resilient in 2024, thanks in part to add-on financing and delayed exits. As a result, we expect continued uptick in privately financed capital.  

3. The market is fragmenting and specializing

Direct lending remains the core of private credit, but the opportunity set is rapidly broadening. Today’s landscape includes:

• Asset-based lending

• Hybrid capital for growth companies

• Real estate credit and infrastructure financing

• NAV-based and PIK structures

• Opportunistic/distressed capital solutions

Managers with deep sector expertise, especially in software, healthcare, energy transition, and AI-related infrastructure, may see a competitive edge.

4. Banks can be partners and not just competitors

The narrative that private credit is replacing banks misses the more nuanced evolution happening under the surface. Banks have shifted from direct lending to roles as originators, syndicators, and capital providers to private credit platforms.

We’re witnessing a symbiotic relationship emerge as banks provide sourcing and risk infrastructure, while private credit funds bring agility and capital depth. Expect to see more partnerships and co-lending models in the years ahead.

5. Investors want yield and are willing to pay for illiquidity

The illiquidity premium that once limited private credit to institutional portfolios is now a selling point for yield-starved investors. Wealth managers and retail platforms are increasingly offering access through interval funds, BDCs, and feeder structures.  

At a time when many public fixed-income assets are under pressure, private credit offers attractive risk-adjusted returns, floating-rate protection, and relatively low correlation to public markets.

6. Covenants and credit discipline are back in focus

With base rates remaining elevated and interest coverage ratios tightening, underwriting quality has become a differentiator. Credit discipline is no longer optional.

Managers are deploying tighter financial covenants, PIK flexibility, and more proactive risk management, particularly in older deals that may struggle to refinance. Structuring creativity is critical, but so is downside protection.

‍

Conclusion

Private credit has evolved from a yield enhancement to a core allocation. It is where public and private markets converge, where sponsors and lenders co-architect capital structures, and where investor demand continues to outstrip supply.

‍