Private Credit Trends report summary
Our latest report uncovers the strategies, structures, and geographies leading the charge in private credit. In H1 2025 alone, the asset class saw $124 billion in fundraising. Putting it on pace to beat 2024’s full-year total. Direct lending still dominates, but over 50% of new fund launches now focus on opportunistic credit and specialty finance as investors seek diversification amid interest rate pressure and tariff-related volatility.
Key trends include:
- A structural shift in the UK and Southern Europe, embedding private credit at the core of institutional portfolios.
- The rise of evergreen funds (now over $500 billion in AuM) and perpetual-life business development companies (BDCs), targeting private wealth.
- A surge in specialty finance and significant risk transfer (SRT) strategies, offering uncorrelated returns and capital-efficient vehicles.
This report leverages our proprietary data and insights to provide fund managers, investors, and advisors with a detailed, forward-looking view of the private credit landscape.
Introduction
Investors – both in the US and internationally – are looking to introduce and increase allocations to private credit. We see a structural shift in the UK and Southern Europe where investors are embedding private credit as a core part of their portfolio. There has been a notable geographic shift towards European and multi-region funds, as investors look to rebalance and mitigate exposure to US tariffs.
Private credit has a firm place in private wealth searches, although allocators are becoming more selective around strategies, underlying securities, and vehicles.
While direct lending has dominated private credit fundraising in the past – and remains the bread and butter of investors’ allocations – interest and fundraising for opportunistic and specialty finance funds has increased notably in 2024 and into 2025.
Over half the upcoming funds coming to market in H1 2025 focus on opportunistic credit and specialty finance, continuing a steady upward trend since Q4 2023.
Opportunistic credit has seen inflows amid a higher-for-longer rate environment, and more recently, tariff-related market volatility. Meanwhile, specialty finance offers the potential for uncorrelated returns, as well as an inflation hedge due to asset backing. We also see some signs that mezzanine funds may gain some market share from buyout, as investors look for strategies with in-built cash flows.
Borrowers are exhibiting signs of stress, with interest coverage ratios falling sharply and a notable rise in the use of payment-in-kind (PIK) facilities. Private credit default rates are still low, but the increasing use of PIK and “liability management exercises” suggests borrowers are struggling with interest burdens.
H1 2025 saw $124 billion of fundraising despite volatility, and the year is on pace to surpass 2024’s full-year total of $215 billion.
Evergreen funds now have over $500 billion in AuM, highlighting growing demand for private credit among high-net-worth investors.
Investors look to introduce and increase allocations to private credit
US allocators are increasingly making their first investments to the asset class as others increase target allocations.
Investors planning to introduce private credit allocations
- Washington SIB ($171 billion)
- Nebraska Investment Council ($43 billion)
- Arkansas Teachers ($22.5 billion)
- Ohio BWC ($21.5 billion)
- Arkansas PERS ($12 billion)
Since 2020, With Intelligence have tracked over 150 US allocators who have introduced or increased their allocations to private credit.
Evergreen funds are emerging as an attractive vehicle to deploy capital quickly into the asset class.
Investors look to introduce and increase allocations to private credit
Allocators are looking beyond the traditional direct lending mandates and considering specialty finance and opportunistic credit to complement their core exposures.
Investment consultants have also expressed their intention to diversify clients’ lending portfolios and look to opportunistic and account based lending (ABL) strategies.
Some intentions to ‘not commit’ may be driven by a ‘wait-and-see’ approach to tariffs.
Structural shift: UK and Southern Europe embed private credit
Investors scale exposure and redesign mandates as private credit moves to the core.
UK
Allocations average around 6%, with defined benefit (DB) and defined contribution (DC) schemes increasing exposure, driven by a growing demand for semi-liquid structures and strategies aligned to maturing pension profiles.
- Semi-liquid vehicles blending infra, real estate, and direct lending.
- NAV lending and value-add debt are being introduced for income resilience.
- Some DC schemes are targeting a 5% private credit sleeve within a 15% private markets allocation.
- The UK private credit market represents >$99+ billion annual deal volume, with a focus on ESG and liquidity.
Italy
Allocations typically range from 3–4%, with several schemes set to double exposure.
- Investors are deploying multi-sleeve mandates that allocate across senior, mezzanine and special situations.
- Domestic allocations are commonly capped at c.30-40%; bulk of the exposure is directed at pan-European strategies to manage concentration and improve diversification.
- Fund selection prioritizes ESG, operational maturity and co-investment experience. Opportunistic or distressed debt is generally avoided in favor of capital-preserving, cash-flow-generating strategies.
- DC platforms are using structured vehicles balancing core and return-focused credit.
Private credit has a firm place in private wealth searches
At a strategy level, we see a shift from direct lending towards distressed, opportunistic and niche finance.
There is a sense of investor caution, which is driving interest in separate accounts and direct deals. There is also a feeling of caution around deals that may have been agreed prior to shifts in interest rates.
Evergreen and interval funds are seeing heightened interest.
Direct lending has dominated private credit fundraising
$210 billion of private credit fundraising in 2024, up from $198 billion the previous year.
Direct lending funds raised 65% of the total.
Fundraising in nearly every other sub-strategy declined compared to 2023 – indicating a “flight to safety” by investors.
There were some record-breaking direct lending raises in the US and Europe, with just five funds accounting for roughly 40% of the fundraising. Two of these ‘mega-funds’ were: Ares Senior Direct Lending Fund III at $15.3 billion ($34 billion with leverage) and ICG Senior Debt Partners V at $17 billion.
84% of all money raised in 2024 went to managers who were established pre-financial crisis. This was 78% in 2023. Investors are looking for a safe pair of hands as they expect the credit cycle to turn and result in challenging times ahead.
Borrowers are exhibiting signs of stress
Interest coverage ratios are low alongside increasing rates of payment-in-kind.
Average interest coverage ratio in private credit loans has declined from a peak of 3.2x in 2021 to ~1.5x in recent months.
Proportion of borrowers with IC ratio <1.5x now stands at 47%, up from just 7% in Q4 2020.
IMF Financial Stability Report: over 40% of private credit borrowers have negative free cash flow.
Significant increase in use of payment-in-kind facilities since 2022, indicating that borrowers struggling with interest burden.
Formerly limited to mezzanine debt, but increasingly being used in senior direct loans.
A relatively low headline private credit default rate masks the increasing use of liability management exercises, which points to more potential stress in private credit.
Q1 2025 saw record fundraising despite volatility
H1 fundraising outpaced same period in 2024.
59 final closes in H1 2025 for a total of $124 billion, 50% above H1 2024’s total of $82 billion from 41 funds.
$72 billion raised in Q1, the busiest single quarter in at least two years and the busiest Q1 ever.
The ‘mega-fund’ trend continues with two further $10+ billion closes: Ares Capital Europe VI (€17.1 billion/$18.8 billion) and Oaktree Opportunities Fund XII ($16 billion).
