Private credit has emerged as the defining growth story in alternative assets over the past few years. As of early 2025, total assets under management are estimated at between $1.7 trillion and $1.8 trillion and are projected to surpass $2.6 trillion by 2029, according to Morgan Stanley. While mid-market direct lending has historically anchored the asset class, surging capital inflows have fuelled a marked shift toward large-cap lending, signalling a broader evolution in both deal size and market ambition.
In the last two years, direct lenders have helped finance some of the largest leveraged buyouts (LBOs). One prominent example is the Hargreaves Lansdown take-private last year, which involved a consortium of lenders including KKR Credit and Apollo Global Management underwriting a £1.75 billion unitranche loan. This placed it among the largest direct lending deals in European history.
Last year saw a slight tilt towards syndicated lenders, with direct lenders giving up a small amount of market share year-on-year, yet they still accounted for $70 billion of the $130 billion in new-issue loan value according to Mckinsey’s Global Private Markets Report 2025.
Irrespective of whether the loans are being underwritten to large-cap global businesses or agile mid-market businesses, the universal appeal of private credit is that it offers speed to market and the ability for management teams to secure bespoke financing terms that are not necessarily possible in the broadly syndicated loan market.
Aether Financial Services is one of the leading independent agency firms in Europe mainly dedicated to private debt financings.
“We’re seeing a growing number of sponsors and corporates turning to private lenders for bespoke, swift, and confidential solutions that traditional syndicated loans or public bonds can’t match,” comments Louis Thuillez, Head of Private Debt Execution, Aether Financial Services.
In today’s volatile environment, private credit offers speed of execution, flexibility in structuring, and greater alignment of interests. Large-cap borrowers are increasingly prioritising certainty and discretion over pricing alone.
Private debt AUM is expected to pass $2.6 trillion by 2029.
“Meanwhile, private lenders are stepping up with larger tickets, more sophisticated governance tools, and a willingness to engage in complex capital structures. This shift is reshaping the competitive landscape. Our role is to help clients navigate this evolution, structuring deals that combine strategic optionality with robust investor protections. The rise of private credit in large-cap deals isn’t a trend; it’s a structural transformation,” asserts Thuillez.
At the same time, investors are increasingly focused on downside protection and governance rights.
With continuing innovation in deal structuring and a growing appetite for hybrid instruments – i.e. unitranche loans that combine senior and junior debt in a single loan facility - private debt is becoming notably more strategic and recognised as an inescapable asset class.
The ability to circumvent volatility in the broadly syndicated loan market is another factor behind GPs turning to private credit lenders to finance buyouts.
This was evidenced earlier this year when EQT agreed to sell Karo Healthcare to KKR. To finance the deal, KKR utilised a EUR1.1 billion unitranche loan arranged by lead lender Apollo Global Management, in addition to CVC, JPMorgan Chase, Jefferies, as well as KKR’s own credit platform.
Higher rates. More opportunistic deals.
US interest rates have fallen yet they remain elevated, in the 4.25%-4.50% range; a level they’ve been at since December 2024. With US retail sales recording a 0.6% growth in June, signaling a slight improvement in economic fortunes, the Federal Reserve is not likely to make meaningful cuts anytime soon.
And while a higher rate environment is good for private credit managers, it unavoidably applies pressure on heavily indebted businesses who have to service a higher cost of debt on their balance sheets. Although the percentage of distressed debt exchanges, whereby companies default, is still only 2% to 3%, the overall volume of distressed exchanges is at record levels. As highlighted by JP Morgan Private Bank, 2024 saw $11.8 billion of distressed exchanges for leveraged loans. This compares to $7.7 billion in 2023.
This is potentially an attractive environment for opportunistic credit and distressed debt investors, as they look to diversify their investment activities beyond primary corporate lending. Opportunistic credit is becoming more dynamic and sophisticated, with growth fueled by investor appetite for alternative yield.
In 2024, specialty finance and opportunistic credit accounted for 30% of new mandates, up from 21% the previous year. This trend is expected to accelerate in 2025.
In addition, the opportunistic credit market is seeing continued innovation in liability management transactions (LMTs), including new structures to address the so-called maturity wall of loans coming due.
“Opportunistic credit allows us to target mis-priced risk and complex situations, which often offer attractive risk-adjusted returns" - Maxime Laurent-Bellue, Tikeahu Capital
Refinancings, higher rates, regulatory shifts and tighter lending conditions are driving more borrowers into distress, further increasing demand for opportunistic credit solutions.
Tikehau Capital is highly active in the private credit space. Its multi-strategy platform allows it to participate across the asset class, including direct lending, special situations, and opportunistic credit, where the team sees compelling value amid market dislocations.
Current market dynamics and unsustainable capital structures are creating a ground for disciplined, flexible capital.
“Our Opportunistic Credit strategy is designed to capture these inefficiencies, leveraging our entire credit platform, global reach, and deep sourcing network. We remain selective, with a 3% investment rate, and focus on resilient structures and ESG integration,” explains Maxime Laurent-Bellue, Group Deputy CEO, Co-Head Credit and Head of Tactical Strategies & Structured Credit Strategies, Tikehau Capital.
He explains that opportunistic credit can thrive in volatile times, as more companies face capital gaps requiring tailored and flexible solutions.
“This environment demands agile capital and deep expertise,” says Laurent-Bellue. “Opportunistic credit allows us to target mis-priced risk and complex situations, which often offer attractive risk-adjusted returns. By combining a broad origination platform and versatile deal flow with disciplined underwriting, we aim to deliver attractive risk-adjusted returns while supporting companies or projects that struggle to access traditional capital markets.”
As we move through the second half of 2025, structural tailwinds continue to reinforce private credit’s upward trajectory - whether through large-cap corporate lending, the expansion of opportunistic strategies, or the growing focus on distressed and special situations. Meanwhile, asset-backed lending is rapidly gaining momentum, widely seen as the next frontier for private credit and forecast to grow from $5.2 trillion to $7.7 trillion by 2027.
For private credit managers and investors alike, the market offers no shortage of complexity, opportunity and alternative sources of yield, making it not just an allocation, but a strategic imperative in today’s evolving financial landscape.
