Key Takeaways
- • Specialty finance accounted for roughly 20% of all private credit fundraising in 2025, up from 4% in 2024, according to S&P Global's Private Credit Fundraising Report 2025 cited by Brookfield.
- • Brookfield argues that as private credit grows more complex, specialized expertise in asset-level and structural credit risk becomes a key differentiator for investors.
- • The expanded private credit spectrum extends beyond direct lending into opportunistic credit, real estate debt, infrastructure debt and asset-backed finance, each with distinct risk and return profiles.
- • Brookfield contends that the market's evolution mirrors public credit, which moved from investment grade bonds into high yield, senior loans and CLOs, with returns increasingly driven by expertise and credit selection.
- • Brookfield stresses that manager selection and due diligence on sourcing, underwriting and structuring capabilities are critical, since outcomes across sectors and structures may widen.
Summary
Brookfield's commentary, titled "Accessing the next layer of private credit," argues that private credit has become a broader and more complex market, with institutional investors increasingly looking beyond direct lending toward specialized exposures. The firm cites S&P Global data showing specialty finance, which includes predominantly asset-based finance and fund finance as well as aviation finance, royalties, significant risk transfer and life settlements, accounted for roughly 20% of private credit fundraising in 2025, up from 4% in 2024.
Brookfield frames the trend as following a historical pattern in public credit, which began with investment grade bonds and expanded into high yield bonds, senior loans and collateralized loan obligations. In both public and private markets, the firm says, a relatively homogeneous market with standardized risk-return profiles has given way to a more diverse landscape in which returns depend on expertise, structuring and credit selection.
The commentary identifies several risk areas gaining attention, including payment-in-kind structures that can signal borrower stress, sector concentration vulnerable to technological disruption, liquidity mismatches between long-term private assets and investor redemption expectations, and looser underwriting in more competitive segments. Brookfield argues these risks underscore the need for granular evaluation of assets, structures and borrower fundamentals.
The firm profiles four specialized strategies. Opportunistic credit targets idiosyncratic stress and dislocation, including distressed debt and rescue financings. Real estate debt involves senior, whole loan and mezzanine lending secured by property, where Brookfield says asset-level expertise is essential. Infrastructure debt finances essential assets such as renewable power, utilities, data centers and transportation; Brookfield cites an estimated $100 trillion in global infrastructure capital needs by 2040, attributed to McKinsey & Company (September 2025). Asset-backed finance is described as underwritten against pools of underlying assets and cash flows, requiring segment-specific legal and servicing expertise.
Brookfield concludes that manager selection warrants the same rigor as underwriting itself, and that investment outcomes will be driven by underwriting precision, operational insight and asset-level risk assessment. The commentary is presented for informational purposes and does not constitute an offer of securities.
Brookfield frames the trend as following a historical pattern in public credit, which began with investment grade bonds and expanded into high yield bonds, senior loans and collateralized loan obligations. In both public and private markets, the firm says, a relatively homogeneous market with standardized risk-return profiles has given way to a more diverse landscape in which returns depend on expertise, structuring and credit selection.
The commentary identifies several risk areas gaining attention, including payment-in-kind structures that can signal borrower stress, sector concentration vulnerable to technological disruption, liquidity mismatches between long-term private assets and investor redemption expectations, and looser underwriting in more competitive segments. Brookfield argues these risks underscore the need for granular evaluation of assets, structures and borrower fundamentals.
The firm profiles four specialized strategies. Opportunistic credit targets idiosyncratic stress and dislocation, including distressed debt and rescue financings. Real estate debt involves senior, whole loan and mezzanine lending secured by property, where Brookfield says asset-level expertise is essential. Infrastructure debt finances essential assets such as renewable power, utilities, data centers and transportation; Brookfield cites an estimated $100 trillion in global infrastructure capital needs by 2040, attributed to McKinsey & Company (September 2025). Asset-backed finance is described as underwritten against pools of underlying assets and cash flows, requiring segment-specific legal and servicing expertise.
Brookfield concludes that manager selection warrants the same rigor as underwriting itself, and that investment outcomes will be driven by underwriting precision, operational insight and asset-level risk assessment. The commentary is presented for informational purposes and does not constitute an offer of securities.
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