Why Everyone's Talking About Private Credit in 2025

Demand for private credit continues to surge, with projections suggesting it could hit $2.8 trillion by 2028.¹ Private credit has stepped into the spotlight in 2025, and it’s not hard to see why. Amid volatile markets, evolving trade dynamics, and investors’ growing appetite for alternative income, private credit offers something rare: the potential for attractive risk-adjusted returns and yield. Here’s what’s fueling the boom and why more investors are adding it to their portfolios.

What’s Driving the Private Credit Boom?

The 2023 regional banking crisis accelerated the pre-existing trend of banks retreating from lending to private companies that tend to be below investment grade or not rated. This void is being filled by private credit. Unlike banks, which are subject to stricter regulations and capital requirements, private lenders offer more flexibility and can tailor loan structures to meet the specific needs of borrowers. This flexibility, coupled with their increasing pool of capital positions private credit as a crucial source of financing, particularly for businesses that may not meet the stricter criteria of traditional banks.

More recently, the macro backdrop of 2025 has been a perfect catalyst for private credit’s rise. Volatility across traditional stocks and bonds has prompted investors to seek for assets less tied to public market swings. At the same time, geopolitical tensions and new tariff policies are reshaping global trade, tightening corporate borrowing conditions, and creating demand for non-bank lending alternatives.

Private Credit 2025 Outlook

The momentum behind private credit isn’t expected to slow. In 2025, specifically, there are several tailwinds for private credit:

• Middle-market companies often underserved by traditional banks are increasingly turning to private lenders to finance growth, acquisitions, and recapitalizations.
• Sector-specific opportunities in industries like healthcare, technology, and infrastructure are expanding.
• Institutional allocations continue to grow, with pension funds and insurers viewing private credit as a core income strategy rather than a niche alternative.

However, investors should also be mindful of risks: tighter financial conditions could pressure weaker borrowers, and while the market is expanding, manager selection will remain critical.

Why Investors Are Paying Attention to Private Credit

A sustained spread premium continues to exist between public and private markets, allowing investors to earn higher yields for lending privately. This spread advantage, combined with the evolving debt landscape, has created a rich opportunity set for private credit lenders.

Recent years have seen a major shift: instead of relying on traditional syndicated loan markets, many companies have turned to private credit for refinancing needs. Looking ahead, attention is shifting toward a looming maturity wall, as a significant portion of high-yield bonds and leveraged loans are set to come due in 2026 and 2027. In contrast to past cycles, this maturing debt could see even greater private market participation as companies seek flexible financing solutions outside of traditional bank lending.

At the heart of private credit’s appeal are three core benefits:

• Attractive yields: Private loans often offer higher income than comparable public bonds, a compelling advantage in a higher-rate world.
• Reduced correlation to traditional stocks and bonds: Private credit tends to be less sensitive to day-to-day market swings, helping diversify portfolios.
• Potential inflation protection: Many private credit deals feature floating-rate structures that adjust with rising rates.

Access to private credit is expanding. Historically reserved for large institutions, private credit is now increasingly available to individual investors through new vehicles, such as ETFs. This democratization is reshaping the landscape, but with it comes the need for careful attention to credit quality, illiquidity risks, and manager expertise.

The Role of Private Credit in a Diversified Portfolio

Is private credit here to stay? All signs point to yes. The rise of private credit is part of a broader rethinking of portfolio construction. As traditional fixed income struggles to deliver the same returns and diversification benefits it once did, investors are seeking alternative income sources. Private credit fits the bill, offering a differentiated return stream while complementing traditional assets and investment strategies.

Institutions are leading the way, often carving out dedicated allocations to private credit within their multi-asset portfolios. Retail investors are following suit, thanks to more accessible vehicles. VanEck believes that private credit will play a strategic role in diversified portfolios moving forward. However, investors should carefully weigh liquidity needs, risk tolerance, and manager quality when making allocation decisions.

Accessing the Market: Private Credit ETFs and BDCs

Traditional private credit investments, while offering the potential for attractive returns and yield, come with a drawback: illiquidity. Unlike publicly traded stocks or bonds, these investments often involve long lock-up periods, typically several years. This means your money is tied up for the duration, inaccessible for immediate needs or strategic portfolio adjustments. This inflexibility can be a major hurdle for investors who require more dynamic access to their capital, especially in a market rife with uncertainties. In an environment where liquidity is highly prized, Business Development Companies (BDCs) present a compelling, liquid alternative to traditional private credit strategies.

BDCs bridge the gap between traditional private credit and publicly traded securities. BDCs offer the same benefits as traditional private credit strategies – the potential for higher yields and diversification away from traditional stocks and bonds, but in a much more liquid form.

ETFs like the VanEck BDC Income ETF (BIZD) offer diversified exposure to leading BDCs, which in turn invest across a wide range of private loans. For investors seeking access to private credit opportunities without the barriers of direct lending, including capital commitments, illiquidity, and operational complexity, BIZD provides a streamlined alternative.

Importantly, these vehicles allow investors to participate in private credit’s growth potential while maintaining daily liquidity, transparency, and simplicity.

Investing in the Firms Powering Private Markets

Another way to tap into the growth of private credit is by investing in the companies that operate and manage the funds behind it. These are alternative asset managers, firms that provide financing through private credit while also overseeing capital across private equity, real estate, infrastructure, and venture capital. As the organizations sourcing deals, structuring loans, and allocating private capital, they are positioned to benefit directly from the increasing demand for private market solutions.

While investors have long been able to buy shares of publicly listed alternative asset managers, the role these firms play in portfolios is evolving. As demand for private credit and other private market strategies grows, these companies are expanding their business models. Many are reaching beyond institutional capital and into wealth management and retirement channels, broadening their investor base and solidifying their importance in today’s investment landscape. With access to long-term capital and resilient fee structures, they are well positioned to benefit from the continued shift toward private markets.

To help investors access this opportunity, VanEck has introduced the Alternative Asset Manager ETF (GPZ). This ETF seeks to track as closely as possible, before fees and expenses, the price and yield performance of the MarketVector Alternative Asset Managers Index (MVAALTTR), which is intended to track the overall performance of alternative asset managers across private equity, venture capital, private credit, private real estate, and private infrastructure.

Unlike direct private investments, GPZ offers diversified exposure to the firms driving the expansion of private markets. As private markets reshape global capital flows, alternative asset managers have become central to this transformation. GPZ gives investors a way to participate in that growth through a single, liquid, and transparent ETF.

What Comes Next for Private Credit?

As the private credit market matures, several themes are likely to shape its future:

• Regulation: Increased attention from regulators may lead to more oversight, especially around risk management and disclosure.
• Growing demand: New entrants, from large asset managers to fintech platforms, are making private credit more competitive and innovative.
• Portfolio integration: Private credit is becoming a core portfolio allocation, not just a niche play.

Looking ahead, VanEck sees private credit evolving into a mainstream income strategy for both institutions and individual investors. The combination of structural growth drivers, macro tailwinds, and new access pathways positions private credit as a critical part of the investing conversation — not just in 2025 but well beyond.

To receive more Income Investing and Thematic Investing insights, sign up in our subscription center.