Private credit forecast to reach $2.64 trillion in 2029 — Preqin

Private credit had a slow start to fundraising in 2024, but the asset class is still forecast to see significant growth in coming years and hitting an all-time high of $2.64 trillion in 2029 from a current level of $1.7 trillion, according to Preqin’s new global report on private debt.

But there will be some bumps ahead with investors pointing to performance concerns in the next year and managers highlighting growing competition in the industry.

Preqin forecasts a trough for fundraising in 2025 but expects growth to pick up in 2026 and to see private credit assets under management grow at a compound annual growth rate of 9.9% from the end of 2023 to 2029. That’s less though than the 14% growth rate seen from 2012 to 2023.

Direct lending alone is forecast to see its assets under management increase to $1.33 trillion in 2029, taking a much greater share of fundraising from 55% at end of 2023 to 66% by 2029, according to Preqin estimates.

There are some concerns over performance in the future, with 35% of investors saying they are expecting worse performance for private credit over the next 12 months compared with the previous 12 months pointing to base rates falling, according to a Preqin survey of 255 investors conducted in November.

But investors are holding their allocations steady, with only 9% reporting they would reduce allocations to private credit — in line with 8% the year prior. Nearly half, 49%, of investors said they intend to increase their private credit allocations.

The past year brought plenty of merger and acquisition activity as well as strategic partnerships in private credit. Just last week, BlackRock announced it would acquire HPS Investment Partners.

Other moves included Blue Owl Capital agreeing to acquire credit manager Atalaya Capital Management; Janus Henderson Group agreeing to acquire a majority stake in global private credit manager Victory Park Capital Advisors; and Clearlake Capital Group agreeing to acquire European private credit specialist MV Credit from Natixis Investment Managers.

“We are seeing increased average fund sizes, which favors larger players and points to potential economies of scale from any consolidation in the asset class,” said R.J. Joshua, vice president and head of private debt and fees, research insights at Preqin, in an email to Pensions & Investments.

Preqin noted that experienced managers have continued to gain ground over first-time entrants. “With most investors favoring established managers, new entrants will struggle to establish themselves without solid investor backing,” according to the report.

Investors are looking beyond direct lending, with 45% reporting they think asset-backed lending will present opportunities followed by 41% showing interest in secondaries.

While interest rates are worrying investors, private credit managers pointed to competition for assets, at 49%, as a top concern followed by deal flow and geopolitical risk at 38%. And 58% of managers said competition for deals is increasing.

“Until there is a significant increase in private equity deal flow, competition will likely be a challenge,” Preqin said in its report.