Home Private Credit Private Credit Fees Tick Higher
Author: Thomas Monteiro | Photos: Shutterstock
Investors, though, continue to debate the true cost of owning private credit funds.
This article appears in the September 2026 issue of Global Finance Magazine.
For the first time since the Covid-19 pandemic, private credit ’s headline management fees are returning to historical norms.
According to data analytics firm Preqin’s latest fund-terms report, direct-lending funds raised in 2025 charged a mean management fee of 1.42% and a median of 1.50%, essentially matching the asset class’s long-term 2005-2025 averages of 1.43% and 1.50%, respectively.
That marks a sharp reversal from the post-pandemic doldrums, when managers cut prices to compete for a shrinking pool of investor capital amid weak fundraising and slow distributions. The median fee on direct lending funds fell to just 1%, and the mean sank to historic lows of 1.25% to 1.32%.
Now, competition for capital appears to be easing at the top of the market, while headline prices tick higher. However, beneath the headline numbers, what investors are paying is a more complicated matter.
“The headline management fee tells you very little about what investors actually pay,” said Ludovic Phalippou, a professor of financial economics at Oxford University’s Saïd Business School. “I expect the true all-in cost to be very high.”
Chad Timko, senior investment officer at the Los Angeles County Employees Retirement Association (LACERA), one of the largest U.S. public pension funds, valued at $93.9 billion, made a similar point from the practitioner’s perspective: “How a manager pays for performance can be just as important as the performance itself.”
The reversal in headline fees isn’t happening evenly. Preqin’s data links it directly to performance. For funds raised between 2015 and 2019, top- and bottom-quartile managers charged nearly identical fees, averaging about 1.42%. For 2020-24 vintages, that changed; top-quartile funds held their fees near 1.42%, while fees in the lower three quartiles fell to between 1.24% and 1.29%.
Behind that split lies a market that has become sharply concentrated among a small number of managers. Two-thirds of all private-credit capital raised in 2024 went to the 20 largest funds, up from less than half in 2020, according to Preqin.
Average fund size has continued to climb for experienced managers, but first-time managers’ fund sizes have remained flat at roughly $120 million for five years. Fee discounts have followed the same pattern; the share of fund agreements offering early-investor or large-commitment discounts fell from 41% for 2016-18 vintages to 33% for the 2022-24 period, and the size of those discounts has also shrunk.
Some investors view the buildup of capital among top managers as a warning sign. Pension money pouring into private credit in recent years has “got out of hand,” loosening underwriting standards across the industry, said Mark Steed, CIO of the $25.8 billion Arizona Public Safety Personnel Retirement System. “There’s going to be a shakeout.”
Investor sentiment has grown more cautious even as realized results tick up. In Preqin’s most recent survey, 35% of institutional investors called private credit assets overvalued, up 16 percentage points year-over-year, and 37% expect performance to soften over the next 12 months, chiefly citing the path of interest rates.
Similarly, PwC’s 2026 global private credit survey identified o…