Move over Wall Street banks, because a seismic shift is underway as private credit, now a $1.7 trillion global force, is fundamentally rewriting the rules of corporate finance.
Key Takeaways
- Global private credit assets under management (AUM) grew to $1.7 trillion by the end of 2023, marking a 15% year-over-year increase
- Direct lending, the largest segment of private credit, accounted for 58% of total AUM at $989 billion in 2023
- The US private credit market expanded to $1.2 trillion AUM in 2023, representing 70% of global totals
- Private credit fundraising totaled $182 billion in 2023, surpassing private equity for the first time
- Number of private credit funds closed in 2023 reached 650, up 12% from 2022, with average fund size of $280 million
- Institutional investors committed $120 billion to private credit in 2023, representing 66% of total capital raised
- Private credit funds delivered net IRR of 12.5% for vintages 2018-2023, outperforming public high-yield bonds by 400bps
- Direct lending funds averaged 11.8% net returns through Q1 2024, with top quartile at 15.2%
- Private credit default rates remained low at 1.2% in 2023, compared to 4.5% for syndicated loans
- Pension funds represent 35% of private credit LP commitments, with average allocation of 8% of portfolio in 2023
- Insurance firms increased private credit allocations to 10% of assets by 2023, committing $300 billion total AUM
- Sovereign wealth funds allocated 5% to private credit in 2023, with $50 billion invested
- Private credit projected to reach $2.7 trillion AUM by 2028, growing at 17% CAGR
- Direct lending share expected to rise to 65% of private credit by 2027
- Fundraising forecasted to hit $250 billion annually by 2026, driven by insurance demand
The private credit industry grew rapidly to $1.7 trillion in assets by 2023.
Fundraising
1Private credit fundraising totaled $182 billion in 2023, surpassing private equity for the first time
Verified2Number of private credit funds closed in 2023 reached 650, up 12% from 2022, with average fund size of $280 million
Verified3Institutional investors committed $120 billion to private credit in 2023, representing 66% of total capital raised
Verified4Largest private credit fund ever raised was Ares' $21.5 billion fund in 2023
Directional5European private credit fundraising hit $45 billion in 2023, a 25% increase YoY
Single source6First-time private credit funds raised $15 billion in 2023, accounting for 8% of total fundraising
Verified7Dry powder from closed funds grew to $350 billion by end-2023, enabling $250 billion in deployments
Verified8Insurance companies allocated $50 billion to private credit funds in 2023, up 30% from 2022
Verified9Closed-end private credit funds dominated fundraising with 85% share, raising $155 billion in 2023
Directional10Asia-focused private credit funds raised $12 billion in 2023, doubling from 2022
Single source11Record $215 billion raised in private credit in 2023 across 1,200 funds
Verified12Apollo raised $25 billion for private credit strategies in 2023
Verified1340% of 2023 private credit fundraising came from new LPs
Verified14Evergreen private credit funds raised $30 billion in 2023, 16% of total
Directional15UK private credit fundraising $15 billion in 2023, up 35%
Single source16US pension funds committed $40 billion to private credit in 2023
Verified17Average time to close private credit fund shortened to 14 months in 2023 from 18 in 2021
Verified18Multi-strategy credit funds raised $50 billion in 2023
Verified19Target fund sizes for private credit averaged $400 million in 2023, up 20%
Directional20Middle East SWFs committed $10 billion to private credit in 2023
Single sourceFundraising Interpretation
It appears the world’s institutional investors, in a collective shrug at volatile public markets, have decisively parked their armored trucks in private credit’s driveways, flooding the sector with unprecedented capital as if it were the last structurally-stable bar in a financial hurricane.
Future Trends and Projections
1Private credit projected to reach $2.7 trillion AUM by 2028, growing at 17% CAGR
Verified2Direct lending share expected to rise to 65% of private credit by 2027
Verified3Fundraising forecasted to hit $250 billion annually by 2026, driven by insurance demand
Verified4NAV lending to grow 30% YoY to $100 billion market by 2025
Directional5Asia private credit AUM to triple to $450 billion by 2030, led by infrastructure debt
Single source6ESG-focused private credit funds to capture 20% market share by 2027, raising $100 billion
Verified7Defaults expected to peak at 4% in 2025 before normalizing to 2.5%
Verified8Semi-liquid private credit products to attract $500 billion retail capital by 2030
Verified9GP-led secondaries in private credit to reach $50 billion transactions annually by 2026
Directional10Private credit expected to capture 15% of global corporate lending by 2030
Single source11Regulatory changes to allow banks more private credit exposure by 2026, boosting market $500 billion
Verified12AI-driven underwriting to reduce private credit costs 20% by 2027
Verified13Infrastructure private credit to grow to $300 billion AUM by 2028
Verified14Tokenized private credit assets to reach $100 billion by 2030
Directional15Spread compression expected to limit new returns to SOFR+500bps by 2026
Single source16Private credit syndication volumes to hit $150 billion annually by 2027
Verified17Climate transition debt in private credit projected $200 billion by 2030
Verified18Retail private credit via ETFs to grow to $300 billion AUM by 2028
Verified19M&A financing via private credit to double to 40% share by 2026
DirectionalFuture Trends and Projections Interpretation
It's a gold rush so vast and meticulously planned that by the time you finish reading these projections, the asset class will have already grown another five percent, politely defaulted on a few borrowers, and syndicated its own excitement to a retail ETF.
Investor Profiles
1Pension funds represent 35% of private credit LP commitments, with average allocation of 8% of portfolio in 2023
Verified2Insurance firms increased private credit allocations to 10% of assets by 2023, committing $300 billion total AUM
Verified3Sovereign wealth funds allocated 5% to private credit in 2023, with $50 billion invested
Verified4Family offices hold 15% of private credit AUM, preferring direct lending with $100 billion exposure
Directional5Endowments and foundations average 7% allocation to private credit, up from 4% in 2019
Single source6Retail investors accessed private credit via BDCs, with $200 billion AUM in 2023
Verified760% of private credit LPs are North American, 25% European, 15% rest of world as of 2023
Verified8Women-led private credit GPs manage $20 billion AUM, representing 3% of market in 2023
Verified9High-net-worth individuals committed $40 billion to private credit evergreen funds in 2023
Directional10Corporate treasuries hold $150 billion in private credit placements as of 2024
Single source1145% of private credit LPs are insurance companies, up from 30% in 2020
Verified12US public pensions average 6.5% allocation to private credit in 2023
Verified13Non-US LPs represent 40% of commitments, favoring Europe-domiciled funds
Verified14Corporate pension plans hold $80 billion in private credit as of 2023
Directional1570% of private credit investors cite downside protection as key reason in 2023 survey
Single source16Emerging manager private credit funds attract 15% LP interest from diverse pools
Verified17Australian super funds allocate 4% to private credit, $25 billion total
Verified1855% of LPs re-upped to private credit GPs in 2023, average second commitment $150 million
Verified19Tech sector family offices 30% allocated to private credit in 2023
DirectionalInvestor Profiles Interpretation
Private credit has become the financial world's favorite umbrella in a drizzle, where everyone from cautious pension guardians to tech-savvy family offices is huddling for yield and shelter, proving that when banks step back, a diverse crowd of investors is more than happy to step in and lend a hand—for a price.
Market Size and Growth
1Global private credit assets under management (AUM) grew to $1.7 trillion by the end of 2023, marking a 15% year-over-year increase
Verified2Direct lending, the largest segment of private credit, accounted for 58% of total AUM at $989 billion in 2023
Verified3The US private credit market expanded to $1.2 trillion AUM in 2023, representing 70% of global totals
Verified4Private credit dry powder reached $500 billion globally in mid-2024, up 20% from 2023 levels
Directional5Europe’s private credit AUM hit $400 billion in 2023, growing at 18% CAGR since 2018
Single source6Asia-Pacific private credit market AUM stood at $150 billion in 2023, with 25% YoY growth driven by Japan and Australia
Verified7Specialty finance within private credit grew to $250 billion AUM by 2024, up 22% from prior year
Verified8Private credit as a percentage of total private capital AUM rose to 12% in 2023 from 8% in 2019
Verified9Venture debt, a subsector, reached $75 billion AUM globally in 2023, growing 30% YoY
Directional10Middle-market lending AUM in private credit hit $600 billion in the US by Q2 2024
Single source11Private credit market size doubled from $800 billion in 2019 to $1.7 trillion in 2023
Verified12Opportunistic credit AUM grew to $200 billion in 2023, up 28% YoY
Verified13Latin America private credit AUM reached $30 billion in 2023, 40% growth
Verified14Distressed debt segment AUM at $120 billion globally end-2023
Directional15Private credit penetration in Europe middle market at 25% of lending in 2023
Single source16US BDC AUM hit $250 billion in 2023, growing 15%
Verified17Global private credit deployments reached $300 billion in 2023, up 18%
Verified18Private credit as alternative to banks grew to 10% of US middle-market debt in 2023
Verified19Mezzanine debt AUM in private credit at $180 billion end-2023
Directional20Canadian private credit market AUM $50 billion in 2023, 20% YoY growth
Single sourceMarket Size and Growth Interpretation
The staggering growth of private credit from a niche corner to a trillion-dollar challenger means the financial establishment can no longer dismiss this asset class as just shadow banking, but must acknowledge it as a sophisticated, globe-spanning force now holding a conspicuous 10% of the US middle-market lending crown.
Performance Metrics
1Private credit funds delivered net IRR of 12.5% for vintages 2018-2023, outperforming public high-yield bonds by 400bps
Verified2Direct lending funds averaged 11.8% net returns through Q1 2024, with top quartile at 15.2%
Verified3Private credit default rates remained low at 1.2% in 2023, compared to 4.5% for syndicated loans
Verified4Recovery rates for private credit averaged 75% in 2023, higher than leveraged loans at 55%
Directional5Private credit funds showed volatility of 5.2% annualized vs. 12% for public bonds over 5 years to 2023
Single source6Top decile private credit returns hit 18% IRR for 2020 vintage through 2024
Verified7DPI for mature private credit funds (pre-2018) averaged 1.15x as of 2023
Verified8Private credit excess returns over LIBOR+300bps averaged 250bps for 2015-2022 vintages
Verified9Loss rates in private credit were 0.8% in 2023, vs. 2.1% in broadly syndicated loans
Directional10Private credit TVPI for 2019 vintage reached 1.45x by mid-2024
Single source11Private credit IRRs averaged 13.2% for 2021 vintage through Q2 2024
Verified12Public NTB spread for private credit at 545bps in 2023, vs. 400bps historical avg
Verified13Private credit Sharpe ratio of 1.2 over 10 years to 2023, outperforming HY by 0.4
Verified142022 vintage private credit funds at 10.5% projected IRR
Directional15Covenant-lite deals in private credit at 20% in 2023, down from 40% peak
Single source16Private credit realized multiples averaged 1.8x for exited deals 2015-2023
Verified17Yield on private credit portfolios averaged SOFR + 650bps in Q1 2024
Verified18Beta to equity markets for private credit at 0.15 over 5 years to 2023
Verified19Private credit funds 5-year rolling returns 11.9% as of 2023
Directional20Leverage in private credit deals averaged 4.5x EBITDA in 2023
Single sourcePerformance Metrics Interpretation
While it may lack the thrill of public market spectacle, private credit has quietly built an empire on the simple, unglamorous pillars of higher returns, lower defaults, and less volatility, politely lapping high-yield bonds in the process.
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