Private credit firms are targeting the wealth market, with the most progress being made in the US. But are there still lessons to be learned? Jon Yarker reports…
The private credit industry has been making a big push into the wealth space in recent years, to diversify its sources of funding and meet its growth ambitions, while democratising access to the asset class.
The US is not only the world’s largest private credit market but is also the most advanced when it comes to making inroads into the wealth space. Figures from investment bank RA Stanger show private credit funds attracted $48bn (£35.4bn) from wealthy US investors in the first half of 2025 – more than over the entirety of 2023. The use of the Business Development Company (BDC) structure adds more transparency to the sector for individuals, and US President Trump’s recent move to include alternative assets, such as private credit, in 401(k) retirement plans is set to boost the market further. While private credit firms in other parts of the world can look to the US, engaging with a new investor base poses several important considerations.
What is wealth?
A starting point for any firm is the definition of ‘wealth’ and what this investor looks like. Rather unhelpfully, this is a nebulous term open to interpretation. Jonathan Bray, private funds partner at Clifford Chance, explains there is a “whole spectrum” of wealth channels.
“This includes everything from high-net-worth private bank channels that have been investing in credit funds for decades, to newer semi-professional or mass-affluent products offering very small ticket sizes,” explains Bray. “We spend a lot of time helping clients understand these options – and what that means for their business.”
Read more: Ares lifts growth forecasts for wealth channel
The variety of wealth clients is an important consideration for private credit firms – just because two clients are both defined as wealthy does not mean they will have the same investment needs or capabilities.
According to Dipan Roy, head of portfolio construction at Redington, this can be broken down into mass market, mass affluent, high net worth and ultra-high net worth. Identifying which of these being targeted is an important consideration for private credit firms.
“Within this market, there can be a wide variety of products with different investment objectives like capital growth, income generation, capital preservation; along with a large range of risk appetites from very cautious to very adventurous,” says Roy. “Given the diverse, fragmented nature of the wealth market, choosing the right product, with an appropriate pricing strategy and suitable distribution channels becomes essential.”
The plan of attack
Once a private credit firm has identified the part of the wealth market it wants to expand into, considerations then turn to tactics. Brendan McCurdy, managing director and head of marketing and research at Ares Wealth Management Solutions, explains that this comes down to two critical areas: product design and distribution.
“In terms of product design, structures should balance access with practicality, including seeking private market returns along with some level of liquidity, transparent reporting and tax efficiency,” says McCurdy. “With respect to distribution, wealth intermediaries and their advisers and platforms play a pivotal role in providing access to investors, and successful access requires robust educational resources, streamlined onboarding and technology that integrates seamlessly into their workflows.”
However, targeting wealth investors goes beyond product development and distribution. The fundamentally different makeups of these end-clients mean the underlying investments within private credit funds have to be assessed as well. Neil Blundell, chief investment officer at CAIS Advisors, says the real focus for these investments is ensuring the durability of these underlying portfolios.
“That starts with focusing on first-lien, senior secured, sponsor-backed loans diversified across industries, and maintaining covenant discipline so managers have the ability to step in early if performance deteriorates,” says Blundell. “It also means underwriting to withstand higher base rates and slower growth and aligning liquidity terms with the true liquidity of the assets.”
BDCs
BDCs have played a significant role is helping US private credit firms access the wealth market. SLR Capital Partners co-founder Michael Gross is also co-chief executive of the SLR Investment Corp, the firm’s BDC, and points to wealthy investors as “ideally suited” to benefit from these structures.
He manages the SLR Investment Corp alongside his co-founder Bruce Spohler, and explains: “Today, we manage our public BDC, SLR Investment Corp and three private BDCs, and we’re developing a new evergreen BDC for launch in 2026.
“While the public BDC is the most visible and longest-standing structure enabling private wealth investors to access private credit, the recent growth of BDCs, at a five-year compound annual growth rate of 33 per cent to more than $500bn, has been driven by the creation and distribution of the semi-liquid, evergreen BDC which offers investors quarterly liquidity of up to five per cent of net asset value (NAV).”
BDCs have been in existence since 1980, but have become a popular strategy for private credit firms in recent years. Their ability to package historically institutional, illiquid asset classes and become accessible on advisory platforms has helped them become “important gateways” for wealth expansion, according to Blundell.
“BDCs largely have exposure to first lien, floating-rate direct lending – a part of the market that has consistently offered about a four per cent yield premium over broadly syndicated loans since 2015, with low correlation to core bonds,” he explains. “The less frequent NAV marking has also helped smooth volatility. All of this has made BDCs an effective bridge, helping private credit move from an institutional tool to a mainstream component of income portfolios in wealth.”
The 401(k) future
Looking ahead, the consensus among experts is that this trend will increase, helped in part by President Trump’s recent executive order mandating the Department of Labor to review the inclusion of alternatives in 401(k)s.
“My Administration will relieve the regulatory burdens and litigation risk that impede American workers’ retirement accounts from achieving the competitive returns and asset diversification necessary to secure a dignified, comfortable retirement,” the order said.
Firms such as BlackRock are already preparing to launch their own retirement funds that will include private credit investments.
According to SLR’s Gross, this increased retail attention will help the market near critical mass.
“The increase in capital supply for private loans will put downward pressure on terms and returns for investors in cashflow lending, where there are lower barriers to entry, for retail and institutional investors alike,” adds Gross.
Some stakeholders have highlighted what the US market in particular has achieved. McCurdy points to the success of the country’s regulatory clarity and structures like BDCs providing a “scalable pathway” for wealth market expansion, with the latter “helping legitimise” private credit. His peers feel the same, and Blundell claims the US private credit market offers a “useful playbook” for other regions.
This optimism isn’t universal, however. Roy highlights two main challenges – the higher fees of private credit making it harder to demonstrate value for money, while the larger ticket sizes required for some investments could price out many wealth clients.
“It’s possibly too soon to learn any lessons from the US private credit industry’s foray into its wealth market,” adds Roy. “We haven’t had a prolonged downturn in private credit for a while, and only in such downturns is it possible to find out if things should have been done differently.”
Read more: Secondaries set to be main beneficiary of 401(k) inclusion
Private credit is undoubtedly growing its presence in the wealth market, with popularity of BDCs having clear success in winning over new investors, especially for some of the largest firms. However the operational complexities of private credit, and vast spectrum of wealth clients, could provide barriers the wider industry will have to tackle.
Conquering the UK wealth market
Private credit firms’ efforts are being noticed in the UK’s wealth market but work is still required. With £57bn in AUM, RBC Brewin Dolphin is one of the UK’s largest wealth firms and head of global manager research (Europe) Shakhista Mukhamedova says private credit remains an area where they maintain exposure despite being underweight on alternatives.
“We’ve built a good relationship with a number of private credit firms over the last five years but have made no meaningful allocation to new relationships yet,” says Mukhamedova. “We are aware of the difficult macro environment for private markets – therefore, we are taking a highly selective approach, looking for high quality managers with long-term consistent track records and prefer strategies with asset backing and/or contracted cashflows.”
Wealth Club is the UK’s largest non-advisory investment service, overseeing £1.5bn in wealth investment since its 2016 launch, and investment manager Nicholas Hyett says limited fund choice makes it “extremely challenging” to invest in the asset class.
“As private credit markets have attracted more capital, the gap between private credit yields and public credit yields has narrowed,” adds Hyett. “That makes private credit comparatively less appealing to income seeking investors – in part because higher quality private credits are still viewed as riskier than publicly traded higher yield.”
Additionally, liquidity remains a key concern for both. This has pushed Mukhamedova towards semi-liquid structures like Hyett, who warns about investors’ levels of private credit knowledge.
“Unlike mainstream credit, investors can’t sell out of semi-liquid assets quickly,” says Hyett. “Finding you can’t withdraw your money when you need to is a nasty surprise, and avoiding that needs the industry to invest in substantial education efforts.”
