Private credit is poised to become the fastest-growing strategy in European alternative investments over the next 12–18 months, according to a new survey of fund managers.
The EU Core Alternative Managers’ Mood Index (CAMMI) was conducted by Gen II Fund Services, an independent private capital fund administrator. The survey of 110 UK and European fund managers revealed that 64% plan to launch private credit funds in the next 12 to 18 months, the highest rate of any alternative asset class.
By comparison, 45% of respondents indicated plans to launch growth capital funds, 33% planned to expand into venture capital and 27% into real estate, over the next year.
This wave of new fund activity aligns with expectations of growing investor demand. The report found 38% of fund managers anticipate that investors will increase their allocations to private credit over the next year, while the remainder are evenly split between those expecting allocations to remain stable (31%) and predicting a decrease (31%).
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As more capital flows into private credit, fund managers are also targeting a broader mix of strategies within the asset class – with planned launches spanning real estate debt (23%), mezzanine (15%), distressed debt (14%) and both venture debt and special situations (13%).
Data from both Preqin and Morgan Stanley predicts private credit AUM could surge as much as 76%, rising from $1.5tn in 2023 to $2.64tn by 2029.
Alex Di Santo, head of private equity, Europe, at Gen II Fund Services, commented: “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.”
Private credit recorded an EU CAMMI Index score of 53.7 this quarter, indicating moderate optimism for increased allocations over the next 12 months. Any score above 50 reflects an expectation of growth among fund managers. While this score trails growth capital (62.8) and venture capital (60.5) but remains well above secondaries and fund of funds (40.2), signalling continued relative strength.
Fund managers reported that they remain mindful of broader macroeconomic risks. Political uncertainty was cited by 33% of respondents as the most significant obstacle to growth, while 25% pointed to the risk of recession, reflecting a note of cautious optimism amid ongoing global economic headwinds.
Di Santo continued: “These concerns have not dampened conviction. If anything, managers are positioning themselves to take advantage of potential dislocation. Private credit has proven to be a very resilient asset class in a challenging macroeconomic environment.”
This article originally appeared in our sister publication, Portfolio Adviser
