For years, private credit fundraising seemed almost automatic. Allocators were underweight, the return profile was compelling, and banks were retrenching from middle market lending. Capital flowed in.
That era appears to have ended. The conversation at conferences has shifted from "how do we access capacity" to "when will fundraising improve." Understanding the current fundraising environment—and where capital is actually flowing—matters for both GPs navigating a more challenging environment and LPs trying to assess competitive dynamics.
The Numbers Tell the Story
According to Preqin data, combined private credit fundraising (excluding funds of funds and venture debt) peaked at approximately $240 billion in 2021 and has declined each year since. The golden age of institutional private credit fundraising appears to have been 2020 through 2024, when mezzanine, special situations, and distressed debt strategies all saw their best three-year trailing runs in over two decades.
On a three-year trailing basis, fundraising has declined meaningfully from recent peaks across every major strategy:
- Distressed debt fundraising peaked during 2019–2021 and has since declined by approximately 35% on a trailing three-year basis.
- Special situations peaked during 2020–2022 and has declined by roughly 18%.
- Mezzanine peaked during 2021–2023 and has declined by approximately 37%.
- Direct lending peaked during 2021–2023 and has declined by roughly 14%.
The conference circuit buzz is accurate: fundraising has been a slog after some heady years.
Where Capital Is Migrating
The decline in traditional institutional fundraising doesn't mean capital has evaporated. It's migrating to different structures.
Separately managed accounts continue to grow as large institutions seek customized exposure with greater control over terms, fees, and portfolio construction. Funds of one—dedicated vehicles for single institutional investors—offer similar benefits for allocators with sufficient scale.
Most notably, retail distribution has become a strategic priority for virtually every major private credit manager. The "armies of retail distributors being raised" reflect a secular shift in where fundraising effort is directed. Interval funds, non-traded BDCs, and other retail-accessible structures are absorbing capital that might previously have flowed to traditional institutional funds.
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This migration has implications. Retail capital often comes with different liquidity expectations, different fee tolerance, and different governance dynamics than institutional capital. Managers raising primarily from retail may face different pressures than those with predominantly institutional investor bases.
Strategy by Strategy
Direct Lending led the gross dollar decline in 2025, which is unsurprising given the strategy's remarkable run of more than half a trillion dollars raised from 2021 to 2024 and the recent difficulties facing private equity exits. Deal flow depends heavily on M&A and LBO activity; when PE exits stall, direct lending deployment slows, and fundraising follows.
Context matters here: 2025 represented the fifth strongest year for direct lending fundraising in the last 26. This isn't a collapse; it's a return to a more difficult normal after an extraordinary boom. The golden age has passed, but the strategy remains substantial by any historical measure.
Distressed Debt fundraising nearly tripled year-over-year in 2025, posting its best results since 2020's COVID peak and fourth best since 2000. The strategy raised more than mezzanine and special situations combined—something that last occurred in 2010 and only happened twice before (2007 and 2008). Fewer funds came to market to capture that tripling, suggesting concentration among larger managers.
Special Situations saw its weakest fundraising year since 2015. Rolling three-year trends will need to revert to 2020–2024 success levels to maintain historic pacing. The question is whether the economy and allocator sentiment will accommodate.
Mezzanine saw its four-year boom (2020–2023)—presumably driven by demand for PIK debt to address overleveraged capital structures after rates rose—sputter in 2024 and 2025. Despite the recent weakness, mezzanine's demise has been exaggerated. Over the past 15 years, total mezzanine fundraising trailed distressed debt or special situations by only about 15%.
The Bottom Line
Private credit fundraising has shifted from tailwind to headwind for most strategies. Capital continues to flow, but increasingly through non-traditional channels: SMAs, funds of one, and retail structures. Managers who built distribution capabilities focused on traditional institutional fundraising may need to adapt. The winners in the next phase will likely be those who can access capital across multiple channels while maintaining investment discipline regardless of where capital originates.
Source: Preqin private credit fundraising data, 2000 through 2025. Excludes funds of funds and venture debt.