This week we conclude our series on the private capital outlook for the year ahead with our fifth theme: “A breath of fresh air: Investing and fundraising in 2025.” 

As private capital’s virtuous cycle sets in motion, 2025 should present plenty of attractive investment opportunities across the capital stack. For senior debt investors, the direct lending climate will continue to be constructive as the reduced but somewhat higher for longer rate environment persists. We expect public debt spreads to continue compressing, leading to the relative risk-reward and income rewards increasingly skewing towards private debt. 

Financing conditions should support higher leverage and a closer alignment between buyer and seller price expectations, which will accelerate M&A flow. This increased activity will put the brakes on spread compression in the traditional middle market, allowing structures and terms to strike a favorable balance for issuers and investors.