What will 2025 bring for the private credit market? As 2024 drew to a close, asset managers shared their views on the road ahead for private credit and the wider investment landscape.Adams Street’s investment professionals said they are optimistic that 2025 will see a broad resurgence in deal and exit activity across private markets. They believe that an acceleration in deployment and liquidity should see GPs returning to market to raise additional capital, with fundraising efforts supported by investors making new commitments after receiving distributions.
Furthermore, Adams Street expects to see historically better yields and creditor protections in 2025, as well as more conservative capital structures, and lower losses are creating attractive opportunities within private credit’s core middle market.
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During a recent roundtable on the outlook for the global direct lending markets, Barings’ Tyler Gately, managing director of North America private credit, and Stuart Mathieson, head of Europe and APAC private credit and capital solutions, said they are starting to see green shoots of renewed deal-making activity, which could unlock an estimated $2tn (£1.6tn) of dry powder from private equity sponsors in the year ahead.
Michael Mowlem, chief investment officer at Connection Capital, also expects 2025 to see a resurgence in deal making. He added that this could lead to a “steady and sustainable recovery with no surprises along the way!”
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Nuveen predicted that relative spreads and credit selection, not risk-free rates, will drive returns in debt markets. “Interest rates will likely be lowered more slowly than previously anticipated,” the investment manager added. “In fixed income, this calls for less emphasis on duration positioning and more on generating alpha via relative spreads and credit selectivity.”
Nuveen is extremely positive on private credit for the year ahead, stating that investor interest remains high, demand is strong, deal volume continues to rise and M&A activity is improving, which should provide a tailwind.
And KKR has said that despite a number of cross currents, its investment outlook for 2025 still tilts positive.
“More gains for investors could lie ahead in 2025,” said Henry H. McVey, partner, head of global macro, balance sheet and risk and chief investment officer of KKR‘s balance sheet.
Read more: BlackRock predicts more performance dispersion in private debt
Lun. Gen 6th, 2025
