SLC Management, sub-advisor to the Sun Life Core Advantage Credit Private Pool, provides their Q1 2026 outlook for the private credit investment grade asset class.
By: SLC Management, sub-advisor to the Sun Life Core Advantage Credit Private Pool1
Primary market sets record, secondary steps up
The 2025 investment grade (IG) private credit market had another record year of new investment activity despite ongoing macro uncertainty around tariff- and policy-related headlines. Following 2024’s record volume of US$125 billion, 2025 primary IG private credit activity is estimated at US$170 billion, reflecting a notable 36% year‑over‑year increase. It was an interesting year characterized by the U.S. Federal Reserve’s prolonged rate‑cut pause in early 2025 then shifting to a cumulative 75 basis points in rate cuts in the second half of the year. At the same time, public corporate spreads saw continued compression, hovering near all‑time lows. Meanwhile, private credit spreads offered attractive liquidity and complexity premiums while still providing attractive all‑in borrowing costs, supporting borrower deferred refinancing activity, capital investment and acquisition financings among high‑quality issuers.
Once again, the IG private credit market proved capable of facilitating large financings. Overall, there were more than 39 transactions raising over US$1 billion dollars each, surpassing last year’s 19 deals. The largest transactions were in the digital infrastructure space, with proceeds used to support the build‑out of mega data center campuses. We also saw stronger demand for delayed‑funding tranches, which increased by ~88% to roughly US$20 billion in 2025, showcasing the flexibility that the private market can offer. Beyond digital infrastructure specifically, industrials had another strong year, leading the charge in issuance with financials and utilities having similarly strong years. Fund financing strategies such as net asset value (NAV) and subscription-line facilities played an increasingly central role for general partners, becoming a core liquidity and execution tool to bridge liquidity or fund accretive growth.
While materially smaller than the primary issue market, the secondary market has become an increasingly active part of the broader IG private credit ecosystem. This market is increasingly used by investors to rebalance portfolios, manage liquidity and access new opportunities. Secondary trade volumes from the largest brokers have typically been estimated at US$3 billion to US$4 billion annually. In 2025, a new broker entered the investment grade private credit secondary market, pushing estimated total annual volume to about US$5 billion.
2026’s outlook – momentum and duration demand
The 2025 calendar year was a marquee period in many ways for the IG private credit market. As we look ahead, 2026 is well positioned to build on 2025’s momentum, in our view. This is despite the market possibly continuing to experience broad, periodic volatility driven by global geopolitical risk and economic policy uncertainty. The pipeline for new deals is expected to remain strong as issuers seek to take advantage of refinancing windows and favourable yield conditions. We expect the expansion of the IG private credit market to continue benefiting from several structural tailwinds. Borrowers are increasingly focused on diversifying funding sources while prioritizing execution certainty. At the same time, bank balance sheets remain constrained by higher capital and liquidity requirements, making the IG private credit market an attractive alternative – particularly for longer‑dated, fixed‑rate financing solutions.
Sector leaders for volume in 2026 should again include industrials and financials, with digital infrastructure (data centers, cell towers and fiber) remaining a key growth driver as the data center build‑out accelerates alongside associated capital investment. Demand for fund finance structures and asset‑backed securitizations is anticipated to remain robust, particularly among high‑quality, non‑cyclical borrowers seeking to broaden and diversify their access to various funding markets.
Barring any unforeseen macroeconomic shock, public spreads are anticipated to remain under pressure, while IG private credit markets are expected to continue providing excess spread over the public market. We believe attractive risk‑adjusted returns available to experienced investors with scale and deep sector expertise are expected to continue to anchor the growth of IG private‑credit activity in 2026.
Key takeaways
Andrew Kleeman
Senior Managing Director, Co-Head of Private Fixed Income
Elaad Keren
Senior Managing Director, Co-Head of Private Fixed Income
Valter Lourenco
Managing Director, Private Fixed Income
1 Exposure to private fixed income in the Sun Life Core Advantage Credit is through investment in the SLC Management Short Term Private Fixed Income Plus Fund and the SLC Management Private Fixed Income Plus Fund to a maximum of 10% of the fund’s assets.
*Views as of December 31, 2025.
Data sources: Private Placement Monitor, 2025–6.
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SLC Management is the brand name for the institutional asset management business of Sun Life Financial Inc. (“Sun Life”) under which Sun Life Capital Management (Canada) Inc. operates in Canada. Sun Life Capital Management (Canada) Inc. is the sub-advisor to certain mutual funds and ETFs for which SLGI Asset Management Inc. acts as portfolio manager.
