Aksia Presents Nebraska Investment Council with Robust Private Credit Outlook

What's New

According to Aksia's April 2025 Private Credit Market Overview presented to the Nebraska Investment Council, private credit funds achieved record annual returns of 15.2% in 2023, while fundraising has rebounded dramatically with a 37% compound annual growth rate since 2023, significantly outpacing both private equity and real assets.

Why It Matters

As traditional banks continue to pull back from middle-market lending due to regulatory pressures and capital constraints, private credit has emerged as a critical financing alternative for borrowers while offering institutional investors attractive yields, portfolio diversification, and inflation protection through predominantly floating-rate structures.

Big Picture Drivers

• Regulatory pressure forcing banks to retrench from traditional lending markets has created significant financing gaps across multiple sectors.

• Yield advantage persists with private credit maintaining a consistent 200-230 basis point premium over comparable public market instruments.

• Capital structure stability shows senior debt maintaining steady leverage levels (~4.7x EBITDA) while enterprise values have increased, providing greater cushion for creditors.

• Performance resilience demonstrated through direct lending loss ratios generally remaining between 0.5% and 2.0% of invested capital.

• Strategy diversification spans direct lending, mezzanine, specialty finance, real estate, and real assets credit across global markets.

By The Numbers

• 15.2%: Record net annual returns for 2023 vintage funds

• $1.6+ trillion: Total private markets fundraising volume in 2024-2025

• 2.3%: Current spread premium for private credit vs public markets

• 11.1x: Average enterprise value multiple in 2024 (4.7x debt / 6.4x equity)

• 37%: Private credit CAGR from 2023-2025, compared to just 3% for private equity

Key Trends to Watch

• Asset-backed strategies including consumer finance, commercial real estate lending, and portfolio finance are gaining momentum as banking constraints create opportunities in structured lending markets.

• Capital solutions through preferred equity, incremental senior loans, and junior debt are addressing growing financing needs in transitional or stressed situations.

• Office market challenges continue to impact legacy commercial real estate debt portfolios despite stronger performance in other property types.

• Upper middle market competition is intensifying, driving spread compression and more aggressive credit metrics in the largest segment of the market.

The Wrap

Private credit's impressive growth trajectory shows no signs of slowing as capital continues shifting from traditional lending sources to alternative providers, though investors must carefully navigate increased competition, evolving credit quality concerns, and sector-specific challenges within this increasingly diverse asset class.