This article summarizes the main private debt trends that have caught the attention of the IPEM Community team these past few months, and will help shape the IPEM Global 2026 event program.
Private debt is facing it's toughest climb yet. The era when direct lending could be treated as a straightforward spread product is fading, and 2026 is forcing investors to differentiate far more carefully between managers that have underwriting discipline and those that have been carried by benign conditions, tight spreads and loose documentation.
It's this environment we'll explore in more detail in our private debt program at IPEM Global 2026.
The asset class has matured, now comes the real test
Private debt investors are in a reflective mood. The sector has successfully institutionalised but now faces a more complex next chapter.
A co-head of European credit notes that the asset class has cemented its place as a core allocation rather than a satellite one, but warns that a large volume of direct lending deals from 2018/19 is reaching maturity "into a tougher environment of higher rates, tighter liquidity and more selective lenders."
This is echoed by a senior practitioner at a global credit platform, noting that repeated macro shocks have created sustained demand for flexible, cycle-aware credit strategies. However, the managers who will win are those who can underwrite through uncertainty.
"The private credit industry has evolved significantly — from a niche alternative to a mainstream asset class. But scale brings new challenges: how do managers maintain discipline, differentiate through origination, and manage portfolio risk as the cycle turns?"
Head of European Private Credit Portfolio Management, global asset manager
A co-head of European direct lending pushes back on the negative narrative around European macro. Falling inflation, low unemployment and modest but stable GDP growth paint a more positive picture than prevailing sentiment suggests. The region's private debt market continues to offer a yield premium that is attracting global capital. But a senior credit specialist cautions that AI is forcing a fundamental re-evaluation of credit risk; distinguishing durable cash flows from disruption risk has become a critical underwriting skill.
Asset-backed finance and specialist strategies are becoming the new frontier
The broadening of the private debt opportunity set continues. Asset-backed finance (ABF) is becoming more important as investors look for ways to diversify away from pure corporate cash-flow risk.
As one co-founder of a specialist platform describes, ABF is rapidly becoming a leading private credit asset class in itself, valued at around $6 trillion. Investors are attracted to diversification benefits by securing loans against specific cash-flow-generating assets.
Another senior head at a credit manager points to the rise of niche strategies — asset-based lending, legal credit, NAV lending and royalty financing — as reshaping dealmaking and liquidity dynamics in ways that traditional direct lending cannot.
Meanwhile, a non-sponsored lending specialist argues that family-owned and entrepreneur-led businesses, which form the backbone of the European economy, represent an underserved and attractive segment that is only now receiving serious institutional attention.
"We monitor over 1,000 active private credit investments across dozens of managers and strategies, spanning direct lending, junior capital, special situations, structured and specialty finance, real estate and real assets credit. The breadth of what now constitutes private credit is fundamentally different to five years ago."
Co-Head Private Credit, global alternatives advisory
Credit secondaries have also been mentioned as being at the start of a structural growth story.
One specialist notes that the market reached approximately $23bn in transaction volume in 2025, representing 130% growth year on year — yet still only 0.5% penetration of the primary private credit universe, versus 2–3% on the equity side.
The structural growth story, they argue, has barely started. A managing director at a global secondaries platform draws the same conclusion, noting that private credit secondaries are emerging as a distinct asset class in their own right, driven by the same liquidity pressure that has supercharged equity secondaries but with even more runway ahead.
Meanwhile, one insurance allocator mentioned how the recent market sell-off has created attractive buying opportunities, allowing LPs to build exposure through the secondaries market.
Opportunistic managers ready themselves
The theme around distressed (or opportunistic) credit has been raised consistently, but is not yet a major buying opportunity. Instead, managers describe a slow-burn stress environment rather than full distressed cycle.
The Co-Head of Europe at a major credit platform concludes that Europe's underdeveloped capital markets and weak growth outlook "favours those with the ability to navigate complexity, capture illiquidity premia, and originate opportunities across fragmented jurisdictions via proprietary channels."
Another firm noted that a higher-for-longer rate environment, economic uncertainty and company-specific challenges are driving a growing need for bespoke capital solutions in existing transactions.
"The question is no longer whether to be in private credit — it is which part of the credit spectrum to be in, and with which managers. Underwriting discipline, covenant design and active portfolio management are now the differentiators. The era of being carried by benign conditions is over."
Head of Europe & APAC Private Credit and Capital Solutions, global asset manager
This is where capital solutions are playing a role, according to one major credit manager. Many businesses remain fundamentally sound but have experienced earnings volatility or cyclical pressure that puts them outside traditional lending criteria. Capital solutions step in to bridge refinancing risk when conventional capital is unavailable.
From a US perspective, the CEO of a $24bn global credit manager describes AI as an emerging credit event that is still yet to fully play out. AI is exposing over-leveraged business models in tech and software that reframes distressed not as a macro story but as a sector-specific one.
Meanwhile, a Managing Director at a US credit platform with a special situations mandate adds that many mid-market companies are navigating genuine capital structure challenges, and that credit discipline — structure, documentation and active portfolio management — is now the key differentiator in a more competitive environment.
How are private debt investors "Mastering the course"?
Private debt is still growing, but it is no longer enough simply to be in the market.
The managers that will command attention are those that can show discipline, depth and a clear point of view across direct lending, ABL and opportunistic credit. The asset class is broadening, but the standard of execution is rising with it. That is the real story of 2026.
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