Global Debt Fundraising: Navigating the Evolving Credit Landscape

Rising interest rates, stubborn inflation, sluggish economic growth and regulatory pressures have combined to create an increasingly complex credit environment. In response to these seismic shifts, borrowers are turning to nontraditional financing options, positioning private credit as a flexible option for their funding needs.

The SS&C Intralinks Global Debt Fundraising Report, produced with data from PitchBook, explores these ongoing shifts and how the move toward nontraditional lenders is reshaping the market. In this blog, we’ll explore the report’s key findings and examine how fund managers are positioning themselves to capitalize on emerging opportunities in the evolving debt landscape.

Private credit surges

While high interest rates have created friction for borrowers, they’ve also presented a unique opportunity for private debt managers. By the end of 2023, returns on corporate loans and high-yield bonds reached roughly 10 percent, with private credit emerging as a key alternative for investors. Direct lending has captured the most capital flow — encompassing 82.6 percent of private debt fundraising YTD. The sector has shown resilience, with USD 84.3 billion raised across 25 private credit funds so far this year, outpacing other debt strategies.

Direct lending takes the lead

In 2024, the demand for flexible financing has driven direct lending fundraising to unprecedented levels, accounting for most of the private credit capital raised this year. With USD 84.3 billion secured across 25 funds YTD, direct lenders are stepping in where traditional banks have stepped back, providing critical liquidity in a volatile market.

Increased competition in the debt market hasn’t deterred experienced managers from raising substantial funds. Four of the largest private credit funds closed YTD exceeded USD five billion AUM reflecting the demand for highly experienced managers with reputations for delivering stable returns in uncertain times.

North America and Europe shine

Two regions — North America and Europe — are emerging as bright spots in the debt fundraising landscape in 2024. Private debt fund managers raised USD 97.8 billion across 44 funds YTD, with North American managers leading the charge, securing USD 73.3 billion across 29 funds. European managers followed, raising USD 22.7 billion across 13 funds.

Diverging strategies

While private credit continues to grow increasingly dominant, traditional bank lending still plays a vital role in the overall debt market. Private credit has become the go-to solution for SMEs and mid-market companies seeking flexible and customized financing, especially as banks tighten their lending criteria due to regulatory pressures. Meanwhile, large corporations still prefer traditional avenues like broadly syndicated loans (BSLs) for their scale and established structure.

As the fast-growing alternative lending landscape evolves, the contrast between these markets is becoming more prominent. Private credit is thriving by providing flexible, customized solutions, while BSLs continue to be the go-to for large corporations seeking substantial funding. Rather than directly competing, both sectors are evolving to meet changing market conditions and fulfill borrowers’ needs while ensuring access to credit across the board.

What’s ahead?

In 2025, private credit’s growth will come into sharper focus. Is it sustainable? Rate cuts may ease pressure on borrowers but may also reduce the yields that made private debt attractive in the first place. Despite continued economic uncertainty, the demand for debt — particularly private credit — remains strong. Companies continue to rely on alternative financing solutions to meet their operational needs, and the appetite for private credit shows no signs of slowing. At the same time, fund managers will need to adjust their strategies as the landscape continues to evolve.

Regulatory oversight is also on the horizon. With the Basel III Endgame set to redefine how banks calculate risk-weighted assets, private credit may face increased scrutiny. As leverage grows in both public and private credit markets, managing risk will be a high priority. 

To stay ahead in this dynamic environment, fund managers must remain ready to seize emerging opportunities while simultaneously navigating the evolving regulatory landscape. 

To gain more insight on the current state of global private equity fundraising, read our report here.