Executive Summary
Private credit assets under management have grown from $440 billion in 2015 to over $1.7 trillion in 2025, representing a fundamental shift in corporate lending. While this growth has filled gaps left by bank retrenchment, it introduces new systemic considerations that warrant careful monitoring.
Market Structure Evolution
The private credit market has evolved from a niche alternative lending segment to a mainstream component of corporate finance. Direct lending now represents 45% of middle-market loan origination, up from 15% a decade ago. This shift reflects both regulatory pressure on banks and institutional investor demand for yield in a low-rate environment.
Risk Assessment Framework
- Liquidity mismatch: Open-ended fund structures with illiquid underlying assets
- Valuation opacity: Mark-to-model pricing with limited price discovery
- Leverage accumulation: Both fund-level and borrower-level leverage increasing
- Interconnectedness: Growing links between private credit and traditional banking
Regulatory Outlook
Regulatory attention to private credit is intensifying. We anticipate enhanced disclosure requirements, stress testing mandates for larger managers, and potential leverage limits within the next 24-36 months. Early movers in compliance infrastructure will benefit from reduced regulatory friction.