Key Takeaways
- • Private credit market reached $1.5 trillion by start of 2024, with projections to grow to $2.8 trillion by 2028, driven by post-financial crisis bank regulations that increased costs for lending to smaller and riskier borrowers.
- • S&P Global Ratings expects generally favorable global credit conditions throughout 2025, including declining defaults and improved credit quality, supported by companies extending debt maturities to reduce near-term liquidity pressures.
- • Lack of transparency, limited market data, and minimal regulatory oversight create distinct risk management challenges in private credit despite supportive near-term market conditions, requiring more rigorous risk assessments from investors.
- • S&P Global Market Intelligence identifies transparent, defensible credit scoring and relative risk assessment across asset classes as foundational best practices for managing private credit exposure.
Summary
Private credit has evolved into a significant alternative asset class, reaching $1.5 trillion in market size by early 2024. The sector's expansion accelerated following post-2008 financial crisis regulatory changes that made traditional bank lending more expensive and restrictive for smaller and higher-risk borrowers. This regulatory arbitrage created opportunity for non-bank lenders to serve borrowers unable to access public debt markets, positioning private credit as a critical funding source for mid-market and emerging enterprises. Projections from S&P Global indicate the market will expand to $2.8 trillion by 2028, reflecting sustained demand for alternative credit products and continued migration of lending activity away from regulated banking institutions.
The near-term outlook for private credit borrowers appears supportive. S&P Global Ratings expects favorable global credit conditions throughout 2025, characterized by declining interest rates, soft landings in developed economies, and improving credit quality metrics. Many companies have proactively extended debt maturities, reducing immediate refinancing pressures and liquidity stress for lower-rated credits. This favorable backdrop has created a benign environment for credit performance across the sector.
However, this optimistic credit environment masks structural challenges inherent to private credit investing. Unlike public bond markets, private credit suffers from substantial information asymmetry—limited transparency regarding underlying borrower fundamentals, sparse standardized market data, and minimal regulatory oversight. These characteristics create acute risk management demands that traditional credit analysis frameworks may not adequately address. As the asset class expands into more complex structures beyond traditional direct lending, the need for sophisticated, rigorous risk assessment becomes increasingly critical.
S&P Global Market Intelligence emphasizes that robust risk management in private credit requires disciplined adherence to best practices, including generation of transparent and defensible credit scores and systematic assessment of relative risk across diverse asset classes and borrower profiles. Given the lack of public market pricing signals and regulatory guardrails, institutional investors must implement enhanced due diligence protocols and leverage specialized risk intelligence tools to navigate the sector's inherent opacity and volatility.
The near-term outlook for private credit borrowers appears supportive. S&P Global Ratings expects favorable global credit conditions throughout 2025, characterized by declining interest rates, soft landings in developed economies, and improving credit quality metrics. Many companies have proactively extended debt maturities, reducing immediate refinancing pressures and liquidity stress for lower-rated credits. This favorable backdrop has created a benign environment for credit performance across the sector.
However, this optimistic credit environment masks structural challenges inherent to private credit investing. Unlike public bond markets, private credit suffers from substantial information asymmetry—limited transparency regarding underlying borrower fundamentals, sparse standardized market data, and minimal regulatory oversight. These characteristics create acute risk management demands that traditional credit analysis frameworks may not adequately address. As the asset class expands into more complex structures beyond traditional direct lending, the need for sophisticated, rigorous risk assessment becomes increasingly critical.
S&P Global Market Intelligence emphasizes that robust risk management in private credit requires disciplined adherence to best practices, including generation of transparent and defensible credit scores and systematic assessment of relative risk across diverse asset classes and borrower profiles. Given the lack of public market pricing signals and regulatory guardrails, institutional investors must implement enhanced due diligence protocols and leverage specialized risk intelligence tools to navigate the sector's inherent opacity and volatility.
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