Direct Lending: Why Global & Why Now?
For investors looking to generate income, preserve capital, and achieve diversification—particularly at a time when macroeconomic and geopolitical uncertainties are high—taking a global approach to direct lending markets can be part of the solution.
The dynamic growth of direct lending over the last 10+ years has captivated investors and captured a fair share of headlines. North America, the largest and most mature market, tripled in size between 2010 and 2024. Estimated to be around $1.5 trillion today, expectations are for it to reach nearly $2 trillion by the end of the decade. The European direct lending market is about half that size, estimated to be between $500 billion and $1 trillion—and growing. Developed Asia Pacific is the smallest market by AUM but arguably has the longest runway for growth, standing at around $28 billion today1.
The impressive growth across these markets is not in size alone. Particularly over the last five years, direct lending has seen a proliferation of growth across different investor channels. Once limited primarily to institutional investors like insurance companies and pension funds, direct lending today has a meaningful retail investor base. In North America, the rise of business development companies (BDCs) has been a significant contributor to that expansion. According to LSEG, BDC AUM surpassed $300 billion in 2024, with roughly half of that coming from publicly traded vehicles—of which there are about 50 in North America—and roughly half coming from non-traded BDCs2.
No Signs of Slowing
Investors’ allocations to direct lending have evolved as well. Five to 10 years ago, private credit was largely considered a satellite strategy, with most institutional investors concentrated in North America and allocating around 1% to the asset class—and that 1% was primarily in traditional, middle market direct lending. Today, many LPs have increased their private credit allocations to upward of 20%, often comprising a wide variety of sub-strategies and spanning multiple regions. Rather than a narrower focus on North America or Europe alone, for example, global strategies focused on capturing relative value across geographies are garnering more interest.
1. Source: Preqin. As of March 2025.
2. Source: LSEG LPC. As of December 2024.
