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Private Credit vs High-Yield: Who’s Winning in 2025?

Private credit now makes up 21% of the U.S. leveraged finance market, outpacing high-yield bonds in LBOs. Here’s what this shift means for dealmakers.

May 13, 2025 • Estimated Reading Time: 4 minutes

Since 2005, private credit assets under management have surged from approximately $200 billion to over $2.5 trillion globally. This growth has been fueled by investors seeking higher yields and borrowers desiring more flexible financing options.

Line chart showing global private credit AUM rising from $200B in 2005 to over $2.5T in 2025

In the U.S., private credit now accounts for about 21% of the leveraged finance market, compared to 40% for high-yield bonds. This shift is particularly evident in leveraged buyouts (LBOs), where private equity sponsors increasingly prefer the bespoke, floating-rate structures offered by private credit funds over traditional high-yield bonds.

Pie chart showing U.S. leveraged finance market: 21% private credit, 40% high-yield bonds, remaining syndicated loans

Several factors contribute to this trend:

  • Regulatory Changes: Post-2008 financial regulations have made banks more risk-averse, reducing their participation in high-yield lending

  • Investor Demand: The search for yield in a low-interest-rate environment has driven investors toward private credit, attracted by its higher returns.

  • Borrower Preferences: Companies favor the speed, confidentiality, and customization of private credit deals.

The implications are significant. As riskier borrowers migrate to private credit, the public high-yield bond market has seen an improvement in average credit quality, with a higher proportion of BB-rated issuers. However, this also means that credit risk is becoming less transparent, as private credit markets lack the visibility of public markets.

Bottom Line: Private credit's ascent is reshaping the landscape of high-yield lending. For private equity professionals, this underscores the importance of understanding the evolving dynamics between public and private credit markets, especially as they pertain to deal structuring and risk assessment.

Sources & References

Callan. (2025). Private Credit Managers Outperform Leveraged Loans. https://www.callan.com/blog-archive/3q24-private-credit/ 

Financial Times. (2024). Is the boom in private credit losing steam? https://www.ft.com/content/bd3c91f2-ded2-45ed-bc6d-7db99fe42d39