Private Credit Outlook: Expanding the Universe

The market for private credit has expanded rapidly in recent years. We expect this growth to persist as lower interest rates boost transaction volume and private financing options evolve to include a wider array of asset classes and risk/return profiles.

There may be some short-term bumps in the road. While the global economy performed admirably in 2024, with GDP growth likely to weigh in at around 2.6%, the range of potential outcomes in the year to come remains wide. Interest rates appear likely to fall further, which should ease pressure on borrowers. But in the US, the potential for higher tariffs—and stickier inflation—may limit the extent of the decline.

Growth Forecast: Still Sunny

We think the long-term secular trend for private credit still paints a pretty picture.

On the supply side, asset managers and other nonbank lenders are increasingly providing capital to a variety of corporate and noncorporate borrowers, offering customized solutions with more flexibility than those that come from traditional bank lenders (Display).

Private Capital Driving Credit Growth

Meanwhile, strong absolute and relative return potential should continue to support demand among institutional investors for privately originated assets. And individual investors are now finding it easier to access private credit—often without having to lock up capital for years, thanks to a wider array of investment options.