Key Takeaways
- • 64% of European fund managers plan to launch private credit funds within 12–18 months, significantly outpacing other alternative strategies including growth capital (45%), venture capital (33%), and real estate (27%), according to Gen II Fund Services' survey of 110 UK and European managers.
- • Private credit assets under management could surge 76% by 2029, growing from $1.5 trillion in 2023 to $2.64 trillion, based on projections from Preqin and Morgan Stanley, underscoring the sector's expansion trajectory.
- • Investor demand is expected to drive allocation growth, with 38% of fund managers anticipating increased allocations to private credit over the next year, while allocations to remain stable or decline are each anticipated by 31% of respondents.
- • Fund launches will diversify across multiple credit strategies, with planned activities spanning real estate debt (23%), mezzanine financing (15%), distressed debt (14%), and both venture debt and special situations (13%), reflecting a maturing asset class beyond traditional direct lending.
- • Private credit's competitive positioning reflects demonstrated historical performance, with Gen II's head of private equity noting the asset class has "performed well over the years" and now encompasses substantially more sophisticated products than early-stage direct lending models.
Summary
Private credit is positioned to become the fastest-growing strategy within European alternative investments over the coming 12–18 months, driven by both manager expansion plans and anticipated investor demand. The EU Core Alternative Managers' Mood Index (CAMMI), conducted by Gen II Fund Services—an independent private capital fund administrator—surveyed 110 UK and European fund managers and found that nearly two-thirds (64%) intend to launch private credit funds during this period. This significantly exceeds the launch appetite for competing alternative asset classes: 45% plan growth capital fund launches, 33% target venture capital expansion, and 27% are considering real estate entry.
The survey reveals a nuanced outlook on capital flows. While 38% of fund managers expect investors to increase allocations to private credit over the next year, the remainder of respondents are divided evenly—31% anticipate stable allocations and 31% predict declines. This mixed sentiment suggests that while growth is anticipated, it may not be uniformly distributed across all market participants or sub-strategies.
The wave of fund launches will not concentrate on a single private credit approach. Managers plan to deploy capital across diversified credit products, including real estate debt (23% of respondents), mezzanine financing (15%), distressed debt (14%), and both venture debt and special situations financing (13% each). This diversification reflects the maturation of private credit beyond its origins in direct lending to mid-market corporates, encompassing an expanded toolkit of credit products and market opportunities.
Asset growth projections underscore the sector's expansion potential. Data from both Preqin and Morgan Stanley forecast private credit AUM could increase 76% from $1.5 trillion in 2023 to $2.64 trillion by 2029—a compound growth trajectory that would position private credit as a dominant component of institutional alternative portfolios. According to Alex Di Santo, head of private equity Europe at Gen II Fund Services, "Private credit has performed well over the years and we expect to see continued growth in the space from established credit funds as well as newer players. Private credit today is a lot more than direct lending—there are many other compelling credit products that are attractive to investors." This commentary underscores both the historical track record driving manager confidence and the expanding strategic scope of the asset class itself.
The survey reveals a nuanced outlook on capital flows. While 38% of fund managers expect investors to increase allocations to private credit over the next year, the remainder of respondents are divided evenly—31% anticipate stable allocations and 31% predict declines. This mixed sentiment suggests that while growth is anticipated, it may not be uniformly distributed across all market participants or sub-strategies.
The wave of fund launches will not concentrate on a single private credit approach. Managers plan to deploy capital across diversified credit products, including real estate debt (23% of respondents), mezzanine financing (15%), distressed debt (14%), and both venture debt and special situations financing (13% each). This diversification reflects the maturation of private credit beyond its origins in direct lending to mid-market corporates, encompassing an expanded toolkit of credit products and market opportunities.
Asset growth projections underscore the sector's expansion potential. Data from both Preqin and Morgan Stanley forecast private credit AUM could increase 76% from $1.5 trillion in 2023 to $2.64 trillion by 2029—a compound growth trajectory that would position private credit as a dominant component of institutional alternative portfolios. According to Alex Di Santo, head of private equity Europe at Gen II Fund Services, "Private credit has performed well over the years and we expect to see continued growth in the space from established credit funds as well as newer players. Private credit today is a lot more than direct lending—there are many other compelling credit products that are attractive to investors." This commentary underscores both the historical track record driving manager confidence and the expanding strategic scope of the asset class itself.
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