The private credit market has experienced remarkable growth in recent years, with significant increases in capital inflows from both institutional and retail channels. Its success and expansion has naturally attracted scrutiny, with some observers questioning the sustainability of the asset class.
This paper offers an alternative perspective: the current state of private credit represents a natural progression of a maturing asset class.
To help investors better understand what success looks like in this changing environment, we highlight three distinct and fast-growing areas of the market: investment-grade corporate private placements, U.S. middle market direct lending and pan-European upper mid-market lending. These examples illustrate that the value in private credit is driven not just by where managers invest, but how they invest: through differentiated origination capabilities, disciplined underwriting and active portfolio management.
A MARKET DEFINED BY SEGMENTATION
Private credit strategies diverge along several major axes:
Geographic diversity
The U.S. continues to maintain its position as the most developed and liquid private credit market, characterized by well-established relationships and a diverse array of direct lending platforms. In contrast, the European market exhibits greater fragmentation and structural complexity. Given the significant investment required to develop and maintain in-depth knowledge of local credit regimes, languages and cultures to operate cross-border, pan-European platforms that leverage regionally dedicated teams and jurisdiction-specific expertise tend to demonstrate a competitive advantage.
Capital structure and credit quality
Private credit spans the breadth of the debt capital stack, ranging from investment-grade corporate private placements to junior capital and NAV-based lending. While investment-grade corporate placements and middle-market direct lending both emphasize stability, covenant protections and predictable cash flows — ideal characteristics for liability-driven investors — they focus on different areas of the market and employ different amounts of leverage.
Relationships and borrower type
A distinguishing feature of middle market direct lending is private equity sponsorship. While sponsor-backed entities represent a small fraction of the market, they tend to be recurring-revenue businesses with strong management teams and ambitious growth strategies. Relationships with sponsors are a critical conduit for differentiated deal flow within the middle market ecosystem. In contrast, non-sponsored transactions may offer potential yield enhancement but frequently involve smaller-scale borrowers that may be characterized by less sophisticated governance frameworks and limited financial reporting capabilities.
The investment-grade corporate private placement market features a broader set of issuers, including utilities, infrastructure projects, financial institutions and even sports leagues. Within industrial sectors, borrowers are typically large, often global businesses that may be publicly traded or family-owned. Many of these companies could access the public bond market, but they choose private placements for the confidentiality, flexibility and long-term, fixed-rate financing that banks and traditional markets are less able to provide. Origination is driven by banking channels and long-standing lending relationships with existing borrowers.
Market structure and competition
The private credit landscape includes a growing number of strategies beyond traditional direct lending, each with its own unique dynamics. Within direct lending, the U.S. middle market has undergone a notable transformation that belies conventional wisdom regarding market saturation. Despite strong capital inflows, the core middle market appears less crowded than it was pre-Covid, a trend explored in greater detail in the following section. In Europe, dynamics differ. Despite the numerous new players in recent years, it is the established lenders with successful long-term track records that have managed to scale.
Scale has also become a key competitive advantage in the investment-grade corporate private placement market. Larger investors with the ability to write significant checks and maintain long-standing issuer relationships have greater access to deals. This includes broad industry opportunities and proprietary or small club deals — at times even engaging directly with borrowers rather than through traditional bank syndication.
THE NEXT PHASE OF PRIVATE CREDIT
Private credit has entered a new era shaped by greater visibility, heightened complexity and a rapidly expanding investor base. Much of the value in private credit is driven by how, rather than where, managers invest. Proactive and highly engaged portfolio management is a defining trait of top-tier managers. For successful managers, a significant share of new opportunities 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.
In short, private credit is not overheating — it is evolving. The sustained overhang of private equity dry powder in both the U.S. and Europe continues to underpin long-term deal flow, highlighting the importance of partnering with managers who can access and execute on these opportunities. For investors who can separate signal from noise and partner with experienced managers who have mastered sourcing, structure and stewardship, the opportunity remains both durable and expansive.
Nuveen is a global investment leader, managing $1.31 in public and private assets for clients around the world and on behalf of TIAA , our parent company and one of the world’s largest institutional investors.2
Authors
Michael Massarano, Partner & Deputy CIO Arcmont Asset Management, a Nuveen company
Laura Parrott, Senior Managing Director, Head of Private Fixed Income
Randy Schwimmer, Vice Chairman, Chief Investment Strategist, Churchill Asset Management, a Nuveen company
Endnotes
1 As of 30 Jun 2025. Nuveen assets under management (AUM) is inclusive of underlying investment specialists.
2 Nuveen as of 30 Sep 2024; world’s largest pension funds 2024 based on research study from Willis Towers Watson, Thinking Ahead Institute | Pensions & Investments, September 2024, rankings based on U.S. funds’ data as of 30 Sep 2023 and non-U.S. funds’ data as of 31 Dec 2023, with certain exceptions; updated annually.
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The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature.
Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Performance data shown represents past performance and does not predict or guarantee future results. Investing involves risk; principal loss is possible. Diversification does not assure a profit or protect against loss.
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Important information on risk
Investors should be aware that alternative investments including private equity and private debt are speculative, subject to substantial risks including the risks associated with limited liquidity, the potential use of leverage, potential short sales and concentrated investments and may involve complex tax structures and investment strategies. Alternative investments may be illiquid, there may be no liquid secondary market or ready purchasers for such securities, they may not be required to provide periodic pricing or valuation information to investors, there may be delays in distributing tax information to investors, they are not subject to the same regulatory requirements as other types of pooled investment vehicles, and they may be subject to high fees and expenses, which will reduce profits.
Real estate investments are subject to various risks associated with ownership of real estate-related assets, including fluctuations in property values, higher expenses or lower income than expected, potential environmental problems and liability, and risks related to leasing of properties.
Investments in middle market loans are subject to certain risks such as: credit, limited liquidity, interest rate, currency, prepayment and extension, inflation, and risk of capital loss.
Private equity and private debt investments, like alternative investments are not suitable for all investors given they are speculative, subject to substantial risks including the risks associated with limited liquidity, the potential use of leverage, potential short sales, concentrated investments and may involve complex tax structures and investment strategies.
Nuveen, LLC provides investment solutions through its investment specialists. This information does not constitute investment research as defined under MiFID.
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