Vaulted private credit sector exhibited more robustness in 2025 compared to the previous year.
In the latest Barnes & Thornburg 2025 Investment Funds Outlook Report, a positive outlook for the private market has been forecasted, with three key sectors expected to thrive: private credit, hedge funds, and cryptocurrency investments.
According to the report, 80% of limited partners (LPs), general partners (GPs), and service providers anticipate a stronger market for private credit compared to 2024, with 35% predicting significant growth, boasting a compound annual growth rate (CAGR) of 20% or more. The private credit market has shown a pattern of consolidation, with the top 50 private credit-focused firms raising 91% of the capital in 2024.
The report also highlights hedge funds as a high-performing sector, with 83% of respondents expecting increased capital inflows in 2025 following a strong year in 2024. Cryptocurrency markets have caught the attention of investors due to improved regulatory clarity, with 84% of GPs and LPs expressing positive sentiment towards crypto investments in 2025.
Other important focuses noted in the report include cybersecurity and AI compliance, as asset managers prioritise cybersecurity and investor data management, with heightened negotiations between GPs and LPs over fund terms reflecting these concerns.
Despite concerns around inflation, high interest rates, and liquidity constraints, investors remain optimistic overall about opportunities, particularly in private credit, hedge funds, and crypto sectors. In fact, nearly 75% of respondents see the current economic outlook as an investment opportunity.
Scott L. Beal, partner and co-chair of Barnes & Thornburg’s private funds and asset management practice, has noted this trend. He emphasises that while GP concerns around fundraising and returns have significantly increased since the 2024 survey, and LP concerns about financing terms and valuations have also risen, the private credit market is still seen as a reliable alternative amid tight lending conditions and high interest rates.
Interestingly, the private credit market has experienced fast growth in recent years, with 23% of respondents currently implementing a private credit strategy, compared to 39% a year ago. Even more striking is the fact that only 4% are not considering a private credit strategy, down from 7% last year.
Small- and mid-cap players are increasingly targeting large-cap deals in the private credit market, indicating a shift upwards in the market. However, 26% of respondents think the private credit market will shift downwards.
As we look towards 2025, the private credit market is expected to continue its "golden age," with hedge funds and cryptocurrency, along with private credit, being the three key sectors believed to thrive in the year to come. The report underscores the importance of operational risk management through cybersecurity and compliance measures, ensuring a secure and prosperous future for investors in these sectors.
In alignment with the report, the private credit market is anticipated to see a strong growth, with 75% of respondents viewing the current economic outlook as an investment opportunity. Additionally, hedge funds and cryptocurrency, similar to private credit, are foreseen as thriving sectors in 2025, as outlined in the report.
