Private credit rises to $3.5tn as capital deployment hits record high

Global private credit has grown to $3.5tn (£2.6tn) in assets under management (AUM), with a record $592.8bn deployed across strategies, according to the Alternative Credit Council (ACC).

The ACC’s Financing the Economy 2025 report found that the global private credit market expanded 17 per cent between 2023 and 2024, while capital deployment increased 78 per cent year-on-year, up from $333.4bn in 2023.

The report, produced with Houlihan Lokey, noted that although the US retains its dominance, accounting for 65 per cent of AUM, Europe’s market is growing rapidly. This has been driven by strong relative-value opportunities and renewed continent-wide investment in energy, transport, digital infrastructure and defence.

The survey draws on responses from 49 private credit managers overseeing a combined $2.1tn in assets.

“Our data shows another year of strong growth and diversification for the sector, underlining its importance as a financing option for borrowers and as a critical part of investor portfolios,” said Jiří Król, global head of the industry body. “Non-performing loan levels have risen in the last couple of years but appear to have stabilised around historical averages.”

The survey found that corporate lending remains the dominant segment of the private credit market, accounting for 60 per cent of investments. The remaining 40 per cent is allocated to asset-backed lending, infrastructure debt and real estate. Fundraising has also remained strong into 2025, the ACC said.

Institutional investors continue to provide the bulk of capital, representing 76 per cent of commitments. However, retail participation has increased “considerably” to an estimated 24 per cent and is expected to rise further. Banks remain the main providers of financing to private credit funds, though new entrants have increased competition and improved borrowing terms, the report said.

Competition between private credit and the broadly syndicated loan (BSL) market remains a key driver of pricing and loan terms, though the ACC expects this pressure to ease soon.

Fund-level leverage remains modest and stable, with respondents reporting $398bn in borrowing, around 32 per cent of net AUM, a level largely unchanged for a decade.

“This year’s report highlights the sustained growth in private credit, and from our perspective as a valuation leader, the reason is clear: investor demand remains robust,” said Cindy Ma, managing director and global head of portfolio valuation and fund advisory. “While we’ve observed some spread compression, returns in private credit are still very attractive compared to more liquid alternatives.”

Despite elevated interest rates and heightened macroeconomic uncertainty weighing on parts of the economy, core credit metrics remained stable in 2024, the ACC explained. Indicators of defaults and portfolio stress are declining from recent peaks, although they remain slightly above historical averages. Falling interest rates and an improving outlook across key sectors in the US and Europe are expected to ease portfolio stress and reduce future defaults.