Non-public credit score continues to ship engaging returns for traders throughout each side of the Atlantic, at the same time as spreads stay tight in US and liquidity pressures rise throughout European markets within the third quarter of 2025.

Within the third quarter of 2025, European direct lending spreads remained regular, whereas US spreads tightened barely, pushed by robust investor demand that has stored competitors excessive and margins below strain, reported CVC Credit score.

The asset supervisor stated that personal credit score stays “sturdy and in excessive demand”, with sponsors more and more turning to each non-public credit score and syndicated loans to finance offers inside the third quarter.

“Whereas misery has risen modestly, it stays concentrated in a restricted set of sectors,” CVC stated. “Current price cuts are anticipated to ease financing circumstances, supporting debtors and probably spurring incremental buyout exercise.”

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In the meantime, Northleaf famous that regardless of compressed spreads, non-public credit score is outperforming public markets by way of yield. Senior secured mid-market loans are providing excessive single-digit gross returns on an unlevered foundation, supported by conservative mortgage buildings and sturdy lender protections.

“Non-public credit score stays resilient and has supplied traders with engaging risk-adjusted returns and contractual money yield,” Northleaf stated in its replace.

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Total, borrower efficiency remained “resilient,” Northleaf stated, though defaults have elevated modestly quarter-over-quarter. The trailing 12-month default price of the US Leveraged Mortgage Index rose barely to 1.5 per cent.

Regardless of the sector’s strong efficiency, liquidity pressures face non-public markets managers in Europe, based on a Morningstar report.

A slowdown in fundraising and dealmaking has created a difficult panorama for different managers, with a liquidity squeeze reshaping investor methods, the agency reported.

Conventional exit routes, comparable to IPOs and strategic gross sales, have grow to be scarce, leaving capital trapped and investor sentiment muted. Morningstar highlighted the rise of semiliquid funds as a response to this pattern.

Learn extra: Non-public credit score surge sparks break up amongst US pension funds