@Nuveen.
The key question for insurance investors is not, ‘Has private credit become too large?’, but ‘How can we discern quality in an increasingly sophisticated and nuanced landscape?’.
Private credit has entered a new era shaped by greater visibility, heightened complexity and a rapidly expanding investor base. Headlines often focus on the surge of capital into the space or speculate on whether the market is overheating. However, Nuveen’s latest research paper, "Private credit’s next phase: finding opportunity in a maturing market", offers an alternative perspective: The current state of private credit represents a natural progression of a maturing asset class.
Among the most common misconceptions about private credit is that it constitutes a singular market. In reality, it has matured into a diverse and dynamic ecosystem, growing 13% annually since the global financial crisis, totalling $1.7 trillion by September 2024, according to industry source Preqin.
Private credit encompasses a range of strategies, each characterised by its own risk profile, borrower attributes, positions within capital structures and regional dynamics. This expansion has given rise to segments such as energy infrastructure, secondaries, venture debt, asset-backed finance and other specialty finance strategies, each addressing distinct borrower needs and investor objectives.
At a time when many public markets remain challenged by volatility, private credit presents a compelling combination of yield, structural protections, risk diversification and access to dynamic sectors driving economic growth. For insurers, the ability to lock in attractive cash flows with covenant support offers stability that can complement broader portfolio goals.
Much of private credit’s value is driven by how, rather than where, managers invest. The sustained overhang of private equity dry powder in both the US and Europe continues to underpin long-term deal flow, highlighting the importance of partnering with those who can access and execute on these opportunities.
Proactive and highly engaged portfolio management is a defining trait of top-tier managers. For successful managers, a significant share of new investment is sourced from existing portfolio companies — whether through add-on acquisitions, refinancing or expanded financing needs — highlighting the compounding benefits of long-term, relationship-based lending.
For investors, partnering with such managers — who have the scale, relationships and structuring expertise — will help maximise the opportunities in this growing asset class.
