The private credit market will be stronger in 2025 than it was in the previous year, according to the third annual Barnes & Thornburg 2025 Investment Funds Outlook Report, which identified private credit as one of three key sectors positioned to “thrive” in the coming year.

Of the US-based limited partners (LPs), general partners (GPs), and service providers surveyed by the law firm, 80 per cent said they expected a stronger market for private credit this year compared to the prior year, while 35 per cent believe it will be significantly stronger, with a compound annual growth rate of 20 per cent or more.

Barnes & Thornburg reported that 58 per cent of respondents said the market will shift upwards, with small- and mid-cap players “increasingly targeting” large-cap deals, while 26 per cent think it will shift down.

The law firm said the findings reflected “a pattern of consolidation” in the sector, pointing to a statistic from Ropes & Gray that showed, in 2024, the top 50 private credit-focused firms raised 91 per cent of the capital.

The research by Barnes & Thornburg also revealed that among respondents who are not private credit professionals, 63 per cent have a private credit strategy in place, up from 37 per cent in 2024, and 23 per cent are currently implementing a strategy, compared to 39 per cent a year ago.

Only 4 per cent are not considering such a strategy, down from 7 per cent last year, according to the report.

Barnes and Thornburg pointed to the fast growth of the asset class in recent years, which had proved to be “a reliable alternative amid tight lending conditions and high interest rates”.

Alongside private credit, hedge funds and cryptocurrency rounded out the three key sectors that respondents to the survey believe can thrive in the year to come.

Nearly 75 per cent of respondents told Barnes & Thornburg that the current economic outlook presents an investment opportunity, even as certain GP concerns around fundraising and returns – and LP concerns about financing terms and valuations – “meaningfully increased” since its 2024 survey.

“While many GPs came into this year very optimistic about expected fundraising, for many managers that optimism has been tempered so far, in part due to market volatility and economic uncertainty,” said Scott L. Beal, partner and co-chair of Barnes & Thornburg’s private funds and asset management practice.