ELTIF 2.0 regulation will democratise private credit access and drive the growth of private credit in 2025, BNP Paribas has predicted.
In a new report authored by Koye Somefun, head of multi-assets and solutions in quant research group (Amsterdam) and Stéphane Blanchoz, head of alternative solutions (Paris), BNP Paribas noted that the private credit market is forecast to be worth $2.8tn (£2.24tn) by 2028.
Somefun and Blanchoz added that the new ELTIF 2.0 regime is part of a broader trend of the retailisation of private markets that is set to transform the market in 2025 and beyond.
“Retail access is also opening up in Asia, while the US Securities and Exchange Commission is evaluating applications for the first private credit exchange-traded funds (ETFs),” they said.
“The advent of ELTIF 2.0 has the potential to significantly increase both the volume and source of capital flows into European private markets.
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“Forecasts for the growth of the ELTIF range from €35bn (£29.08bn) by the end of 2026, according to German rating and analytics firm, Scope, to a European Parliament report suggesting that ELTIF assets might reach €100bn by 2028.
“There is clearly broad confidence that the legislative and regulatory tools are now in place for Europe’s long-term fund regime to fulfil its potential.”
Somefun and Blanchoz also predicted that partnerships in private credit could reshape the market, either through joint ventures or acquisitions, or between insurance companies, banks and asset managers.
“Such partnerships bring together the full chain needed for private credit investment, from those with the money to lend to those with the clients to lend to,” they added.
“Asset managers gain privileged access to deals, as well as a base for distribution in the form of the insurance or private banking partner, removing the need to fundraise.
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“This trend looks set to continue in 2025, driving increasing efficiency in private credit markets and contributing to the maturation of the asset class.”
The report concluded that private credit should not be seen as an opportunistic asset class, but rather a long-term one, linked to the structural bank disintermediation trend.
BNP Paribas expects private credit to attract more inflows in 2025, thanks to yield-seeking investors and the strong fundamentals of companies across Europe.
“For those investors with an appropriate investment horizon, private credit can generate attractive risk-adjusted returns relative to traditional fixed income,” Somefun and Blanchoz added.
“This can be all the more valuable at a time of the indexation and commoditisation of public bond markets, and with savers seeking high-quality investment income for their retirement.”
Read more: BNP Paribas AM expands private debt team for fund launch
