Big Fundraisings and the Ascendancy of Private Credit

2024 was about continued growth in private markets, signalling a transformative shift in global investment trends. Institutional investors, high-net-worth individuals, and sovereign wealth funds increasingly sought private assets for diversification and enhanced returns. While investment managers opened up access to private markets, the standout trend was the continued rise of private credit, fueled by economic uncertainty and evolving capital market dynamics.

Fundraisings Reflect Investor Confidence

Despite a challenging macroeconomic and tough fundraising environment for small and middle-sized funds, private markets witnessed large fundraisings. Industry leaders like Apollo Global Management, Blackstone, EQT, KKR and Hellman & Friedman closed multi-billion-dollar flagship funds.

In private credit, Ares raised $34 billion for its third senior direct lending fund and HPS $21.1 billion for the Speciality Loan Fund VI. Other notable players, including Blackstone and Goldman also reported successful fundraises in this space, underscoring the sector's rapid expansion.

Private Credit: A Rising Powerhouse

Private credit's ascent in 2024 was driven by structural shifts and economic factors. As traditional banks scaled back lending due to regulatory scrutiny and balance sheet pressures, private lenders filled the gap. Middle-market businesses, real estate developers, and infrastructure projects increasingly relied on private credit providers for tailored financing solutions.

Direct lending dominated private credit, supported by strong demand from mid-sized companies seeking non-dilutive capital. Distressed debt and special situations funds capitalised on opportunities arising from economic volatility, while real estate credit emerged as a key focus, targeting markets impacted by rising interest rates and tighter monetary policies.

Institutional investors favoured private credit for its consistent, attractive yields in a low-return environment. Its downside protection through collateralised structures and negotiated terms cemented its role as a cornerstone of institutional portfolios.

Key Trends Shaping Private Markets

• Secondary Market Growth: Secondary transactions surged, offering liquidity to existing investors and entry points for new ones. GP-led secondaries gained prominence as fund managers optimised portfolios.
• ESG Integration: ESG factors continued to be central to private market strategies, with funds embedding metrics to meet the rising demand for sustainable and responsible investing, especially among institutional clients (regardless of Trump's anti-stance).
• Access: Wealth managers continued to offer new private market products and avenues to the private wealth crowd.
• Dry powder: With the record amounts of dry powder sitting on the sidelines, funds came under pressure to deploy or launch continuation funds to provide ongoing liquidity.
• Tech-Driven Efficiency: Managers leveraged data analytics and AI to streamline deal sourcing, due diligence, and portfolio management, enhancing efficiency and competitiveness.Global Expansion: Emerging markets in Asia and the Middle East saw increased activity as investors sought high-growth regions, with sovereign wealth funds playing a pivotal role in fueling this expansion.

Outlook for 2025

Private markets appear set to maintain momentum in 2025, with private credit leading the charge. Despite macroeconomic headwinds, private markets' adaptability and strong investor demand position the sector for continued growth in the year ahead.