Following the GFC, falling interest rates and strict banking regulations created a credit crisis. This gap was filled by asset managers, who provided private capital across various risk profiles and investment horizons.
Investors were drawn to private debt for its diverse strategies, risk-adjusted yields, and reliable income. Portfolio diversification and access to retail capital via fund platforms fuelled its rapid growth as a leading alternative asset class.
While known for funding SMEs, private debt encompasses multiple strategies. Common approaches include senior secured debt for M&A deals, higher-risk mezzanine debt with equity conversion, and distressed debt for restructuring troubled companies. It also finances special situations, infrastructure, real estate, and supports private equity ventures.
The sector is poised for significant growth, with Morgan Stanley predicting it could reach $2.6tn by 2029 (source: Prequin) as banks retreat and investors seek inflation-beating returns.
