$234 Billion Reasons Private Credit Is Not Going Away
$234 billion flowed into private debt funds in 2025 – the second-largest alternative asset class after private equity. The market is far from broken.
But underneath the surface, something significant is happening. When Anthropic released its latest AI tools earlier this year, the weighted-average bid on software performing loans dropped 392 basis points in February alone – the steepest decline since the onset of COVID-19.
Markets are suddenly repricing technology risk, and it is showing up directly in credit portfolios.
BDC Pressure and Liquidity Concerns
At the same time, BDC pressure is mounting. Blue Owl, Ares and Apollo are all maintaining their 5% withdrawal caps amid a wave of redemption requests. Publicly traded BDCs are now trading at significant discounts to NAV.
PIMCO’s Tiffany Wilding has noted that the market has doubled in size over five years while spreads have compressed significantly. The structural question for Nordic institutional investors is whether the risk-adjusted return justifies the illiquidity premium versus public credit alternatives.
What This Means for Nordic Institutional Investors
From a Nordic LP perspective, the private credit stress has several implications:
- Vintage year selection matters more than ever – managers who deployed 2021-2022 capital at tight spreads face a different environment than recent vintages
- Sector concentration risk – heavy software and technology exposure in direct lending portfolios warrants closer scrutiny
- Liquidity premium reassessment – with public credit offering competitive returns, the case for illiquid private credit must be more carefully articulated
- Manager quality dispersion – in a stress environment, the gap between top and median managers widens considerably
The Nordic Perspective: Selectivity Over Scale
Nordic pension funds and insurance companies were generally more conservative in their private credit allocations than their US counterparts. This measured approach is now proving its value.
The current environment does not signal an exit from private credit – it signals a more selective approach. Strategies with genuine collateral backing, conservative LTV ratios, and sector diversification remain attractive. Asset-based lending, infrastructure debt and real estate senior debt continue to attract strong institutional interest in the Nordics.
Private credit is bruised. But the asset class has proven its resilience through previous cycles. For Nordic institutional investors, the current period represents an opportunity to upgrade manager quality and improve vintage positioning – not to reduce the allocation.
Snorre Kofoed-Hansen is Founder & Managing Partner of Nordiq Partners, a Copenhagen-based placement agent specialising in alternative investments for Nordic institutional investors.
