Market Development and Growth
Private credit funds, also known as private credit, are experiencing a significant upswing. These funds are gaining importance for private investors in the German-speaking region as traditional banks withdraw from certain lending segments. According to a Scope study, more than 50 new European Long-Term Investment Funds (ELTIFs) were established in 2024, with a quarter of the funds invested in private loans. International companies such as M&G and Muzinich & Co. have expanded their commitments in Germany to meet the rising demand.
Opportunities for Private Investors
Private credit opens up access to alternative asset classes for private investors, leading to a more diversified investment strategy. These credit funds also offer attractive returns that can exceed those of traditional fixed-income securities. Moreover, more flexible fund structures facilitate easier investing.
Risks for Private Investors
The lack of transparency and the complexity of the fund structures present significant hurdles. An alarming refinancing volume of companies until 2029, along with regulatory uncertainties highlighted by BaFin notices, emphasizes the risks that investors should be aware of.
Conclusion
While private credit funds provide private investors with new opportunities for diversification and the potential for higher returns, the associated risks should not be overlooked. Careful evaluation and information gathering are crucial to navigate potential challenges.