Report: On the Upswing, Private Credit Market Surpasses $3T

A new report from the Alternative Credit Council and Ernst & Young estimates that the global private credit market has surpassed $3T in AUM, marking a significant milestone in the sector's growth which shows little sign of slowing.

Despite the challenges of rising interest rates, inflation, and global economic uncertainty, private credit has proven resilient, with $333.4B of new capital deployed in the past year, a sharp rise from the $203B invested in 2022. Moreover, the report finds that fundraising has begun to stabilize and improve in 2024, with many investors remaining under-allocated to the asset class and performance-related concerns receding. It notes that retail clients are also a growing source of capital for private credit funds, though progress is slow outside the US. However, regulatory certainty over new investment vehicles in Europe should help accelerate investor interest there.

Corporate lending remains the cornerstone of private credit, accounting for 58% of total AUM, according to the report, while sectors like real estate debt, asset-backed lending, and infrastructure debt have also seen substantial growth, together making up 40% of private credit investments. Looking forward, regions like Europe and APAC are expected to see significant growth, driven by continued bank retrenchment and increased regulatory clarity.

The report also shows that larger private credit firms continue to dominate the market, with 20% of the largest firms accounting for nearly 80% of the capital deployed. This dynamic is unlikely to change, as the private credit market continues to consolidate through M&A within the asset management sector and firms also increasingly formalize partnerships with banks.

Source: https://www.ey.com/en_lu/future-of-private-credit