The Rise of Private Credit as a Core Wealth Strategy for the Ultra-Wealthy in 2025

In 2025, the ultra-wealthy are increasingly reallocating capital toward evergreen private credit vehicles, a trend driven by their superior performance in a volatile macroeconomic environment. As interest rates remain elevated and geopolitical tensions persist, investors are prioritizing liquidity, compounding efficiency, and yield resilience—qualities that evergreen private credit uniquely delivers. This shift marks a departure from traditional alternatives like private equity and hedge funds, which face structural limitations in today’s market.

The Structural Edge of Evergreen Private Credit

Evergreen funds blend the flexibility of open-end structures with the long-term focus of private markets, allowing continuous capital deployment and investor redemptions. This hybrid model addresses a critical pain point for ultra-wealthy investors: the inability to access liquidity in traditional closed-end funds, which often lock capital for 10–12 years [1]. By enabling ongoing contributions and redemptions, evergreen funds allow investors to maintain exposure to high-yield private credit while managing cash flow needs. For instance, private credit evergreen funds have amassed over $500 billion in AUM as of H1 2025, reflecting strong demand from high-net-worth individuals and institutional allocators [2].

The compounding advantages of evergreen structures further amplify their appeal. Unlike traditional private equity, where returns are delayed by lengthy drawdown periods, evergreen funds reinvest maturing loans and interest immediately. This accelerates capital turnover and enhances annualized returns. A 12% annual return in an evergreen fund could compound to a 2.5x return over eight years—a performance level rare among closed-end funds [3].

Outperformance in a High-Yield, Low-Liquidity World

The 2023–2025 period of interest rate hikes and geopolitical volatility has underscored the resilience of evergreen private credit. Over one-year, three-year, and five-year horizons, these funds have consistently outperformed leveraged loan and high-yield bond indexes [4]. This outperformance stems from private credit’s structural advantages: floating-rate terms that benefit from rising rates and direct lending strategies that avoid the liquidity constraints of public markets. For example, private credit has delivered positive internal rates of return (IRR) for 23 consecutive years, even during economic downturns [5].

In contrast, traditional alternatives have struggled. Private equity fundraising for commingled vehicles declined by 24% in 2024, marking the third consecutive year of contraction [1]. Hedge funds, while offering tactical flexibility, lack the compounding power of evergreen structures and often underperform in rising rate environments. Real estate-focused evergreen funds, meanwhile, have lagged with median returns of just 3.0% as of April 2025, compared to 13.8% for private credit [6].

Navigating Risks and Structural Gaps

Despite their strengths, evergreen funds are not without risks. Benchmarking challenges persist, as many managers rely on misleading public market indexes that fail to capture the nuances of private credit performance [4]. Additionally, redemption stress—exemplified by the 2023 Wildermuth Fund collapse—highlights the need for robust liquidity management [6]. Investors must also conduct rigorous due diligence on strategy design, as performance dispersion remains significant across asset classes.

The Case for Core Allocation

For ultra-wealthy investors, evergreen private credit is emerging as a core wealth strategy due to its ability to balance liquidity, yield, and compounding. As traditional lenders retreat from credit markets, private credit fills the gap with tailored financing solutions and higher starting yields [5]. The asset class’s adaptability—whether through directly originated investment-grade loans or real asset financing—ensures its relevance in a shifting macro landscape [2].

While structural risks remain, the advantages of evergreen private credit—particularly in a high-rate, low-liquidity environment—make it a compelling alternative to traditional alternatives. As the industry evolves, investors who prioritize flexibility and compounding will likely find evergreen structures to be a cornerstone of their portfolios.

Source:
[1] Global Private Markets Report 2025 [https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report]
[2] Evergreen funds: The next frontier in private markets? [https://www.seic.com/asset-managers/our-insights/evergreen-funds-next-frontier-private-markets]
[3] Evergreen Funds - 2025 Market Overview [https://explore.hamiltonlane.com/2025-market-overview/evergreen-funds]
[4] Evergreen Funds in 2025: Growth, Gaps & Case for Caution [https://www.sganalytics.com/blog/evergreen-funds-growth-gaps-and-caution]
[5] Has the Golden Age of Private Credit Lost its Shine? [https://www.hamiltonlane.com/en-us/insight/private-credit-2025]
[6] Private Credit Trends in 2025 [https://www.withintelligence.com/insights/private-credit-trends-in-2025]