As Private Credit takes off among US investors – will the UK be next?

The latest data leaves little doubt that Private Credit funds are becoming more popular among affluent American investors.

Against a turbulent backdrop in the first half of 2025, individual investors in the US channelled $48 billion into Private Credit funds. That’s more than the entire year for 2023, and it leaves them on track to surpass last year’s record annual inflow of $83.4 billion.

In the UK and other European countries, meanwhile, it’s a somewhat different situation. Almost a third of investors have no exposure to the asset class at all and 80% have less than 5%. Many believe this is about to change.

But taking a step back: what exactly is Private Credit? How could investors add it to their portfolios? And what are the potential opportunities and risks?

Private Credit is a broad asset class which covers lending that takes place outside of the traditional banking sector. Deals are typically direct bilateral arrangements between a corporate borrower and a Private Credit firm backed by investor capital.

Borrowers are typically mid-market companies, with revenues from $100 million to $1 billion. That said, many large firms – such as Sony and AT&T – are now turning to Private Credit due to the speed, customisation and confidentiality it can offer.

The industry has seen a rapid rise since the crisis of 2008 as tighter regulations have curbed bank lending, creating a void for Private Credit firms to step into. Since then, Private Credit assets have grown more than five-fold, to close to $2 trillion today.

Those able to invest have been well rewarded. In the last two decades to December 2024, annualised returns on a hypothetical $10,000 investment from global Private Credit funds were 6.2% p.a. higher than global high-yield bond funds. Past performance is not a guide to the future.

There’s a snag though. Until recently, Private Credit funds were only available to an exclusive clique of investors including pension funds, endowments and other large institutions – plus ultra-high net worth individuals and family offices.

That’s because traditional ‘closed-ended’ funds are complex structures with minimum investment sizes that can run to £5-10 million. They often require capital to be locked up for a decade or more. Such requirements are simply not feasible for most people.

The recent emergence of flexible ‘semi-liquid’ or ‘evergreen’ funds is changing the game. Semi-liquid funds are similar to unit trusts but with a few more restrictions. They are open-ended, accepting new capital and allowing redemptions on a rolling basis – usually once per quarter, subject to restrictions. Minimum investment sizes are also far lower than for closed-ended funds; in some cases, as little as £10,000.

With growing investor appetite, the number of evergreen semi-liquid funds has doubled every five years over the past 15 years, reaching 726 funds in June 2025, with assets worth $419 billion up from $350 billion at the end of 2023. Semi-liquid structures accounted for 18% of total Private Credit fund launches in 2024.

Why might an experienced investor consider Private Credit?

First, Private Credit could add diversification and stability to an investment portfolio. These funds are not exchange traded, helping somewhat shield investors from market volatility – though this also means valuations are less transparent. Plus, Private Credit funds may open up a broader spectrum of borrowers, including many investors won’t usually have in their portfolio.

What’s more, Private Credit is generally seen as a ‘defensive’ asset class. Private loans are mostly secured against collateral and often have priority in a company’s capital structure. Investors should usually be among the first to get paid in the event of a future bankruptcy or liquidation. Deals also often include covenants that can provide critical warning of borrower stress.

Nevertheless, as with all types of lending, there is a risk that the borrower will default or miss interest payments: you could lose some or all of the money you invest. Investors should also keep in mind that Private Credit is illiquid. If you need to exit this will take longer, and be harder, than selling a comparable publicly issued bond.

The political backdrop may prove favourable for investors who want exposure to Private Credit. In the US, the Trump administration has already made some headway in allowing Private Market assets to be included in 401(k) retirement plans – a market worth c. $12.5 trillion. Other governments, including the UK’s, are also pushing for expanded access to Private Markets, including Private Credit.

Keep in mind that semi-liquid funds represent just 5% or so of the total Private Market universe. So, there is plenty of scope for further growth and innovation. As more funds come onto the market, eligible UK investors will likely have a broader range of strategies and managers to choose from.

Wealth Club currently offers semi-liquid funds from some of the world’s leading managers – you can see the full list online.

For each fund, you can read our detailed and impartial review, including strategy, manager track record, examples of previous investments, and risks. 

In line with the FCA’s restrictions on promotion of this type of investment, you will need to confirm you are a high net worth or sophisticated investor before being able to see the fund details.