The Rise of Private Credit: Moving from the Margins to the Centre
Ten years ago, private credit occupied a niche position in the capital markets ecosystem — a solution of last resort for borrowers that could not access bank or public bond markets, and an alternative allocation for investors seeking yield above what investment-grade credit could offer. That characterisation is now thoroughly obsolete.
Private credit has grown from approximately $500 billion in assets under management a decade ago to well over $1.7 trillion today, with forecasts from multiple credible sources projecting continued growth toward $3 trillion by the end of the decade. It is no longer alternative. It is core.
Why Banks Retreated and Credit Funds Advanced
The structural shift that created the conditions for private credit's rise is well understood in broad terms but worth examining in detail. The post-2008 regulatory framework — Basel III and its successors — imposed capital requirements on bank lending that made certain categories of credit structurally less attractive for regulated institutions. Mid-market leveraged lending, construction finance, and certain categories of asset-backed lending all became more expensive for banks to hold. The capital requirements made the economics work less well.
Credit funds, operating outside the bank regulatory perimeter, faced no such constraint. They could hold the assets that banks were being incentivised to exit, price them to reflect genuine credit risk rather than regulatory cost, and provide borrowers with certainty of execution that a bank syndicate could not always match.
The rate cycle of 2022–2023 accelerated this dynamic. As central banks tightened aggressively, bank credit committees became significantly more conservative. Syndicated loan markets became unreliable for all but the largest and most straightforward transactions. Private credit funds — with committed capital and no syndication risk — became the dependable execution partner for sponsors and corporates that needed certainty.
What Borrowers Need to Understand
The growth of private credit has been unambiguously positive for borrowers in terms of access and execution certainty. The trade-offs are real and worth acknowledging.
Private credit pricing is typically higher than bank pricing for equivalent risk — the illiquidity premium is a genuine cost. Covenants in private credit transactions are often more extensive than in syndicated facilities, reflecting the ongoing monitoring requirements of a direct lender. And the relationship with a private credit fund is a concentrated one — there is no syndicate to manage, but there is also no flexibility that comes from distributing risk across multiple institutions.
For the right borrower — typically one with strong cash generation, a clear growth trajectory, and a specific use of proceeds — private credit is an outstanding solution. For borrowers who are primarily seeking the lowest possible cost of capital, bank markets remain the better starting point.
The Advisory Role in a Private Credit World
As private credit has moved to the centre, the advisory function has become more important, not less. The proliferation of credit funds — there are now several hundred active direct lenders operating in the UK and European markets — has created a selection and positioning challenge that most borrowers are not equipped to navigate independently.
Understanding which funds are active in a given sector, at what ticket size, with what return requirements and structural preferences — and being able to position a borrower's story compellingly to a shortlist of genuinely interested counterparties — is the core of what debt advisory does. That function has always been valuable. In a market with more options, more complexity, and more structural variation than ever before, it is indispensable.
Private credit has moved from the margins to the centre. Borrowers who understand how to access it intelligently — with the right advisors, the right preparation, and the right counterparty selection — are the ones who will benefit most from its continued growth.