With the private credit market rapidly expanding in 2025, Alternative Credit Investor asked industry leaders what lies ahead for 2026. Has the market shifted from a golden era to a diamond era?
Cassandra Fahy, managing director in origination at Pemberton Asset Management
“We have a big pipeline of deals, which are focused on quarter one 2026 execution, which are mergers and acquisitions (M&A) driven. For the last few years, it has been said that M&A will pick up and it never really happens, but now that seems to be changing. Unless anything strange happens from a macro perspective, cross border M&A and European M&A deal flows are looking pretty positive at the moment compared to previous years.
“I think this is due to an element of pent-up demand. It could be due to the level of realisations in private equity portfolios, massively slowing down.”
Jeffrey Stevenson, managing partner at VSS Capital Partners
“We’re optimistic about private credit investment heading into 2026. History has shown us a clear pattern. When rates fall, private equity gets deployed, and private credit is the natural beneficiary. With expectations for a more favourable rate environment next year, we expect conditions to bode well for increased opportunities across the private credit landscape.
“The First Brands situation definitely woke the market up, but across the board we see that discipline is rising and not panic. We’re expecting increased selectively from investors, but we do not see the conditions warranting the formation of a true ‘bubble’.”
Toby Furnivall, managing director of private credit at Triple Point
“As a long-standing lender in the space with over 20-years’ experience, we’ve seen particularly robust activity in the second half of 2025 within public sector lending, small- to medium-sized enterprises debt finance and specialty finance; after a more subdued first half of the year, deal flow has increased.
“The 2026 outlook remains cautiously optimistic, but the market is navigating a delicate balance between strong structural demand and macroeconomic uncertainty. The evolving relationship between banks and private credit providers will remain a key factor shaping deal-making dynamics as businesses seek flexible financing solutions.”
Kent Collier, founder and chief executive at Octus
“The secondary market for private credit is still nascent but clearly burgeoning, with players like Apollo and JP Morgan actively trying to create a more liquid secondary market. We’re now seeing some of the largest direct lenders, like Ares, acquire boutique firms that specialise in credit secondaries, a sign of how fast this space is evolving. New Mountain’s decision to sell 17 assets out of its business development companies to rebalance and meet dividend requirements is another major example, with bespoke credit secondary vehicles becoming more common. It’s a trend that’s likely to gain real traction in the US in 2026.”
Michael Gross, co-founder at SLR Capital Partners
“I believe that the high-profile private credit blowups that made headlines in the fall of 2025 marked the end of the ‘Golden Era’ for private credit. During the past several years, as the largest asset managers raised massive amounts of capital through mega-funds and vehicles targeting retail investors, competition for cash flow loans became fierce. Many private credit firms sacrificed credit discipline for asset under management growth. With the continued strain on borrowers, I expect there to be a significant bifurcation of performance among private credit managers in 2026 and beyond, marking the beginning of the ‘Diamond Era’ for this asset class.”
Zach Lewy, founder, chief executive and chief investment officer at Arrow Global
“As we look ahead to 2026, private credit continues its transformation from a cyclical opportunity to a structural pillar of European finance. Europe’s market fragmentation is a source of inefficiency that rewards those with local reach and operational expertise. The most compelling opportunities will increasingly come from smaller, domestic transactions that require specialist underwriting and long-term execution.”
Kevin Hogan, global head of private credit at the Aztec Group
“Private credit’s boom isn’t slowing, but the next phase will look quite different from the last. 2026 won’t just be about expansion, it will be about proving resilience. Regulators are likely to push harder on transparency, leverage controls and data collection. That’s healthy, it forces the industry to confront vulnerabilities earlier, especially around semi-liquid vehicles and valuation opacity.
“Even with pockets of stress, the opportunity set is broadening. Asset-based finance is stepping into its own as a scalable, institutional strategy. At the same time, hybrid capital solutions are gaining ground, particularly among growth-stage companies that need creative funding without going back to equity markets.”
Paul Denham, partner at Morgan Lewis
“Easing of interest rates and stability in the M&A markets will likely fuel lending in the private credit markets into 2026. Investors are also showing strong interest in private credit due to attractive yield premiums and diversification.
“There remains a strong pipeline of private equity-backed borrowers requiring financing and this is increasing the demand for large cap private credit transactions. Likewise, those private credit funds focusing on the mid-market are also seeing an uptick in demand as private credit continues to be a go-to source of financing for leveraged buyouts, add-ons and refinancings.”
Mark Wilton, head of European investments at Corinthia Global Management
“Despite sensationalist headlines and speculation around private credit ‘bubbles’, direct lending continues to deliver strong risk-adjusted returns, particularly where focus lies on the core middle market. Deal pipelines are growing as M&A picks up and are converting at pace, with disciplined execution and robust sponsor relationships driving capital deployment. While default rates and credit downgrades have risen in private larger cap rated markets, core direct lending remains resilient, offering attractive yields and balanced risk. As the private credit market matures and public-private lines blur, Corinthia believes that sticking to a disciplined, long-term approach is key to capturing value through cycles.”
Peter Dahlen, global co-head of leveraged finance at Clifford Chance
“Private credit heads into 2026 on solid footing, with tentative signs of renewed momentum. While European M&A remains subdued, there are early signs of larger transactions returning as valuation gaps narrow and exit visibility improves. Liquidity across markets remains ample, giving sponsors genuine optionality on funding routes.
“Though pricing between private and broadly syndicated debt has converged, private credit continues to offer flexibility and speed, particularly for complex or cross-border deals. Mid-market activity has remained the engine of volume, with lenders showing greater willingness to club on larger transactions.”
