Private Credit Matures Into Mainstream Asset Among RIAs

Private credit investments have “no doubt” become a mainstream asset class for registered investment advisers and are poised to grow even further, according to a report from Alternative Fund Advisors, which specializes in interval funds. 

The report is based on a survey conducted by an independent marketing company of 121 professionals from RIA firms in the U.S. that research funds and/or select funds for client portfolios. According to AFA, the survey found that firms are likely to increase their private credit allocations, regardless of how much they currently hold.

Nearly half (48%) of the respondents said they are very likely or likely to increase their allocations to private credit over the next year, while 34% said they are considering it. Only 18% said they are probably not or definitely not going to increase their private credit allocation. The study also found that 40% of allocators polled said they expect to add at least one new fund to existing private credit portfolios in 2025, while 36% said they are considering it. The remaining 24% said they have no plans to add new funds. Additionally, 45% of RIAs using private credit allocate more than 5% of a typical client’s portfolio to the asset class, with 19%—which AFA refers to as “power users”—allocating at least 10%.

Direct lending is by far the most common strategy used by RIA private credit investors, cited by 74% of respondents, followed by asset-based lending and real estate debt at 42% each. An all-in-one multi-sector approach is used by 37% of respondents, while specialty finance and structured finance are employed by 29% each. While direct lending remains the most prevalent strategy, the surveyed companies indicated that they are looking to invest in strategies that diversify beyond direct lending in 2025.

“Specific strategies targeted for future allocations include asset-based lending, real estate debt, and specialty finance,” the report stated. “Because direct lending dominates current allocations it is not surprising that it tends to be less popular as a 2025 addition.”

Firms are eyeing broad-based multi-sector funds more than other strategies to diversify portfolios, according to responses from 57% of respondents. Asset-based lending was the next most popular choice as a diversifier at 39%, followed by real estate debt and specialty finance at 36% and 35%, respectively. Structured finance drew the least interest, with only 21% saying are likely to adopt the strategy.

“We believe the importance of private credit in client portfolios will only increase in 2025 and beyond,” Alternative Fund Advisors CEO Marco Hanig said in a statement. “Our survey findings validated a trend that we’re seeing in the market—firms have moved beyond owning a single private credit fund. They are now utilizing multiple funds and intentionally diversifying across various sub-segments of the market.”