Private credit to hit $4tn by 2030 as ABF drives growth

The private credit market is expected to reach $4tn (£2.9tn) by 2030, driven increasingly by investment in asset-backed finance (ABF) as investor priorities shift.

According to ratings and research agency Moody’s, private credit will continue to gain momentum, exceeding $2tn in assets by 2026, but the market’s centre of gravity is moving away from traditional US corporate lending towards ABF.

Moody’s said ABF is set to lead growth as partnerships expand and asset origination accelerates. Alternative asset managers are increasingly funding consumer loans and data infrastructure credit, the agency found.

New partnerships are spurring origination opportunities, while alternative asset managers are stepping up as banks remain constrained in certain lending activities, Moody’s said.

Alongside the rise of ABF, mergers and acquisitions and leveraged buyout activity are expected to increase, intensifying competition among lenders but also creating additional funding opportunities, the agency reported.

From a regional perspective, Moody’s said Europe, Middle East, and Africa and the Asia-Pacific are set to gain momentum, driving asset growth as investors seek to diversify returns geographically.

Another growth driver is the expanding range of assets supporting securitisation. The focus is increasingly on sectors where higher yields help compensate for elevated risk, particularly as spreads have compressed across asset classes.

At the same time, growing investor demand for liquidity is pushing private credit managers towards financial innovation, Moody’s said. This includes greater use of structured credit, rated fund structures, net asset value lending and payment-in-kind loans to meet the demand.

Meanwhile, the rising appetite for evergreen funds is reshaping distribution channels across the private credit market, further altering how managers raise and deploy capital.