Nontraded BDCs Extend Growth Streak, Deliver Strong Returns in H1 2025
As direct lending continues to appeal to consumers seeking flexible financing in an uncertain market, nontraded business development companies (BDCs) are solidifying their role as both a lifeline for entrepreneurs and a steady income generator for investors. According to Blue Vault Partners’ second-quarter 2025 data, the sector logged its third consecutive quarter of growth while producing robust total returns in the first half of the year.
Performance trends remain encouraging: non-accrual rates for active offerings tracked by Blue Vault are below 1%, with most under 0.5%. Portfolios remain heavily weighted toward senior secured debt, typically above 96%, limiting credit risk in an environment of heightened investor scrutiny. “While this could evolve as portfolios season, current performance among nontraded BDCs remains strong,” said Luke Schmidt, VP and director of research at Blue Vault.
Fundraising momentum remains strong. Public capital raised reached $9.6 billion in Q2 2025, edging higher than Q1’s $9.4 billion and well above the $7.5 billion in Q4 2024. Private fundraising came in at $3.1 billion, down slightly from Q1’s $3.5 billion but still comfortably above late-2024 levels. Industry leaders continue to dominate flows: Blackstone’s Private Credit Fund has amassed $32.2 billion since launching in 2021, raising $2.2 billion in Q2 alone. Combined with Blue Owl Credit Income Corp., the two funds accounted for nearly 40% of all new public capital raised in the quarter.
Total industry assets under management hit $212.2 billion at midyear, up from $176.1 billion at the end of 2024. This represents a fourfold increase since late 2021, highlighting the sector’s rapid growth and appeal. New entrants such as Antares Capital and First Eagle launched offerings this year, both leaning heavily on senior debt structures.
Blackstone remains the industry leader with $76.7 billion in assets as of June 30, 2025, more than double runner-up Blue Owl’s $33.3 billion. Returns were broadly positive across the space: the median industry return through H1 2025 was 4.05%, while the average was 3.72%. Only NexPoint Capital Inc. posted negative results.
Income distributions continue to stand out as a key attraction. The average distribution yield at midyear was 8.95%, with several funds offering double-digit payouts. Among I-share classes, top yielders included Blackstone (10.49%), Kennedy Lewis Capital Company (10.50%), TPG Twin Brook Capital Income Fund (10.43%), and Oaktree Strategic Credit Fund (10.37%).
As of June 30, Blue Vault tracks 21 open and three closed publicly offered nontraded BDCs, with annualized gross operating expense ratios ranging from roughly 3% to 6%. With strong fundraising, expanding AUM, and healthy portfolio performance, the sector appears positioned to remain a central driver of private credit expansion and retail investor income in the quarters ahead.
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