Debt Capital Markets in 2025: Investor Sentiment Shifts Toward Optimism

Global debt capital markets (DCM) investors entered 2025 with renewed confidence. Buoyed by a growing trust in DCM assets over the past year — driven by the normalization of interest rates and easing inflationary pressures — the sector began the year with substantial levels of dry powder that must be put to work. There was also confidence in asset valuations and an overall sense of optimism — albeit cautious. 

A flurry of activity is expected H1 2025 

According to the 2025 SS&C Intralinks DCM Investor Report, produced in partnership with Reuters, allocations to DCM assets are expected to grow in the coming months. Despite the slower than anticipated normalization of interest rates, firms around the world largely boosted DCM asset investments over the past year. Additionally, the 425 globally based investors and advisors we surveyed for the report — asset managers, portfolio managers, private equity firms, institutional investors, pension funds, family offices, hedge funds, endowments and foundations — believe the trend will continue.

Our findings indicate that activity will start to build up in the first half of the year, driven by a large pool of capital waiting to be deployed, coupled with economic tailwinds and emerging opportunities. This positive sentiment is also prevalent among investors in APAC as Chinese officials have pledged to increase debt issuance and cut rates to stabilize the country’s property markets and stimulate its economy through fiscal measures in 2025.

Asset classes: Which ones will capture investors’ interest? 

With cautious global economic optimism on the rise, confidence in DCM assets across the board is expected to continue, according to survey respondents. Allocations are expected to increase to most, if not all, DCM asset classes over the next three years. The clear frontrunners will likely be private debt, credit and direct lending thanks to their relatively attractive yields and potential for steady returns.

Public debt markets, particularly investment-grade and high-yield credit, are also gaining momentum and are expected to draw a growing share of investor capital in the next 12 months. Certain asset-backed securities will remain attractive, but distressed debt and non-performing loans (NPLs) are unlikely to draw significant attention in 2025. The high risk and low liquidity associated with those might be too much for today’s strategy-focused, cautious investor. 

The sectors we’re watching 

Beyond the financial sector, which has positively benefited from the easing inflationary and interest rate environment, Energy is another sector with a promising outlook. Ongoing conflicts in Ukraine and the Middle East have contributed to the volatility of global energy markets, driving up crude oil prices and prompting energy producers to ramp up production to capitalize on the opportunity. For many energy companies — especially those focused on production and providing equipment or services — these higher prices will make it easier to turn a profit and see stronger earnings. Additionally, the rise of artificial intelligence (AI) technologies will increase the demand for energy in the coming years. AI relies on large-scale data processing that requires significant computing power, as well as the development of infrastructure to support its expansion. 

AI itself is also emerging as a particularly lucrative sector this year. Investors are fully embracing technological advancements and increasingly shifting toward integrating AI into their investment strategies. Although data privacy and cybersecurity remain concerns, 77 percent of the investors we surveyed indicated that their organizations are already heavily reliant on AI to shape their DCM investment decisions. AI technologies are becoming more deeply integrated into everyday business operations, so it’s clear that AI transformation is already in full swing. 

The path forward: It won’t be linear 

While the future might look bright, the DCM investment landscape will not be without its challenges. The investors we surveyed are not entirely convinced that global markets are out of the woods just yet. Asset valuations are expected to rise in the years ahead, but the risks of re-pricing — due to current high valuations and possible market shifts — could pose challenges for investors. Inflation, changes in interest rates and technological disruptions — particularly blockchain and AI — will only add to the roadblocks hindering the market’s recovery. Regulatory uncertainty driven by political regimes and the many elections held over the past year will only heighten the possibility for volatility.

One thing is clear: Investors are craving stabilization. While the road ahead may not be without bumps, the optimism surrounding DCM assets is undeniable. Confidence among investors is steadily rising, dry powder is ready to be deployed and the stage is set for a promising 2025.

For a more detailed analysis of the DCM landscape, download the 2025 SS&C Intralinks DCM Investor Report. Based on a survey of 425 global investors and advisors, the report explores their allocation plans, risk concerns and critical challenges for the next 12 months.