Private credit has grown into a $2T+ asset class with strong yields and investor demand. Explore the sector’s performance, fundraising trends, and what lies ahead—direct from Kingsbury & Partners.

Key Takeaways

  • Private credit AUM surpassed $2 trillion in 2023, with global fundraising doubling since 2014—fuelled by demand for yield, bank retrenchment, and institutional momentum.

  • Dry powder remains elevated at over $520 billion, highlighting cautious deployment and a readiness to capitalise on dislocation in areas like distressed debt and infrastructure.

  • Direct lending continues to dominate, while mezzanine and wealth-focused vehicles (e.g. interval funds and BDCs) expand access to retail channels.

  • Floating-rate private credit strategies delivered 11.1% net returns in 2023, offering stability and inflation protection in high-rate environments.

  • Kingsbury & Partners delivers tailored private credit strategies, including direct lending, mezzanine, and distressed opportunities—structured in-house with an emphasis on governance and client alignment.

Introduction

Private credit has evolved into a cornerstone of alternative investments over the past decade, driven by structural changes in global finance and investor demand for higher yields. As traditional bank lending continues to contract, private credit fills the gap with flexible, tailored solutions. Fundraising and dry powder in the sector tell a compelling story of resilience and opportunity. From $123.7 billion raised globally in 2014 to $215.5 billion in 2023, private credit has become the second-largest fundraising strategy after private equity, with assets under management (AUM) surpassing $2 trillion (Source: PitchBook H1 2024 Global Private Debt Report).

Fundraising: A Ten-Year Surge

The private credit industry has demonstrated remarkable fundraising growth, with capital raised doubling between 2014 and 2023. Even in 2024, fundraising momentum remains strong, with $90.6 billion committed by mid-year. Direct lending, the largest sub-strategy within private credit, continues to lead, accounting for over half of all fundraising in 2024 (Source: PitchBook H1 2024 Global Private Debt Report).

This growth is not confined to institutional channels. The wealth segment—perpetual vehicles aimed at individual investors—has emerged as a critical driver. In 2024, wealth-focused funds are projected to raise $63 billion, up 40% year-over-year. These vehicles include interval funds and non-traded business development companies (BDCs), making private credit more accessible to retail investors (Source: PitchBook H1 2024 Global Private Debt Report).

A notable example of this scale is Ares Management’s flagship fund, which closed with $33.6 billion in commitments—double the size of its predecessor (Source: Private Equity Wire). According to Dylan Cox, Head of Private Markets Research at PitchBook, “Private credit’s ability to deliver higher yields in a high-rate environment has solidified its position as an alternative to traditional fixed-income investments.” (Source: The DI Wire)

The Role of Dry Powder

Dry powder—undeployed capital—remains a vital component of private credit’s growth narrative. Globally, dry powder exceeded $520 billion at the end of 2023, accounting for 31% of total AUM. This significant reserve underscores the sector’s preparedness to capitalize on emerging opportunities, particularly in sectors like distressed debt and infrastructure (Source: Athene Investor Reports)

Increased dry powder levels also highlight a cautious approach to deployment, reflecting macroeconomic uncertainties and higher borrowing costs. Fund managers are strategically holding capital, ensuring they are well-positioned for potential downturns or market dislocations. This approach aligns with private credit’s reputation for being both opportunistic and resilient.

Chart: Private Credit Dry Powder Growth (2014-2023)

Private Credit Dry Powder Growth

Source: PitchBook H1 2024 Global Private Debt Report

Performance and Investor Appeal

Private credit’s performance continues to attract investors. In 2023, direct lending funds delivered net returns of 11.1%, outperforming many other private market strategies. Floating-rate loans, which constitute the bulk of private credit holdings, provide a hedge against rising rates, making the asset class particularly appealing in volatile environments (Source: S&P Global Indices).

Furthermore, private credit offers a compelling risk-adjusted return profile. With lower volatility compared to public equities and consistent distribution rates, it provides investors with a stable income stream. This reliability has been instrumental in attracting both institutional and retail investors.

Future Growth: Projections and Opportunities

Private credit’s future appears robust, with AUM projected to exceed $3.5 trillion by 2030. Several factors support this forecast:

  1. Structural Shifts in Banking: The ongoing retreat of traditional bank lending creates opportunities for private credit to fill the gap, particularly in middle-market financing.
  2. Global Expansion: Emerging markets offer untapped opportunities for private credit, with demand growing for infrastructure and mezzanine debt.
  3. Investor Demand: The search for yield in a low-return environment ensures private credit remains a key allocation for diverse portfolios.

However, challenges persist. Rate cuts by central banks could diminish the appeal of floating-rate instruments, while a hard economic landing could pressure non-investment-grade borrowers. As PitchBook’s Nizar Tarhuni notes, “The sector’s ability to adapt to changing macroeconomic conditions will determine its trajectory in the next decade.”

Chart: Projected Growth of Private Credit AUM (2024-2030)

 

Projected Growth of Private Credit AUM

Source: PitchBook H1 2024 Global Private Debt Report

Client-Centric Investment Strategies

For investors, private credit represents a versatile and high-performing asset class. Key strategies include:

  • Direct Lending: Providing senior loans to middle-market companies, direct lending offers attractive yields and strong downside protection.
  • Mezzanine Financing: Ideal for investors seeking higher returns, mezzanine debt occupies a junior position in the capital stack but offers equity-like upside.
  • Distressed Debt: For those willing to accept higher risk, distressed debt provides opportunities to invest in undervalued assets during economic downturns.

Kingsbury & Partners is uniquely positioned to offer bespoke solutions tailored to client needs. By leveraging insights from our network and expertise in private credit, we provide access to high-quality opportunities that align with individual risk tolerance and investment objectives.

Conclusion: The Case for Private Credit

The last decade has cemented private credit’s role as a critical component of modern investment portfolios. Its ability to deliver consistent, high-yielding returns while adapting to shifting economic landscapes makes it a cornerstone for wealth creation.

As the sector continues to grow, investors must remain vigilant, balancing opportunities with risks. For those seeking diversification, stability, and income, private credit offers a compelling case—one that promises to redefine alternative investments for years to come.

Chart: Fundraising Trends in Private Credit (2014-2024)

 

Bar Chart Example

Source: PitchBook H1 2024 Global Private Debt Report

Sources:

Looking to gain exposure to high-performing private credit strategies?
→ Kingsbury & Partners provides institutional-grade access to structured private credit opportunities—built in-house, governed with discipline, and aligned with your long-term objectives. Contact us to learn more.
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