Key Takeaways
- • Private credit managers are shifting from concentrated flagship commingled funds to modular platforms spanning direct lending, asset-based finance, opportunistic credit, special situations, fund finance and secondaries, according to Macfarlanes.
- • Platform expansion is occurring at both strategy and structural levels, with SMAs, evergreen and semi-liquid vehicles, co-investment programmes, rated note feeders and insurance- or private-wealth-oriented structures offered to different investor groups.
- • Record manager M&A activity in 2025 has accelerated platform building, as large managers acquire smaller specialist firms to extend into adjacent strategies.
- • Key governance risks include the "boundary problem" of defining strategy scope, allocation conflicts across vehicles, product cannibalisation, and governance frameworks designed for fewer commingled funds.
- • Investors are increasingly assessing how governance frameworks operate in practice, not just whether they are documented, with due diligence focusing on decision-making and consistency with disclosures.
Summary
Macfarlanes argues that private credit is evolving along two parallel trends: platform expansion and product specialisation. Franchises that once centred on one or two flagship commingled vehicles are becoming modular platforms with a growing range of specialist strategies. This evolution reflects both manager-side and investor-side dynamics. Managers are incubating new strategies within broader opportunistic or special situations mandates before launching them as standalone products once they reach sufficient scale and track record. Investors, meanwhile, have moved private credit from a tactical to a strategic asset allocation component and are refining allocations into more granular sub-strategies while consolidating relationships with a smaller number of GPs.
Platform expansion is occurring across both strategy and structure. Asset-based finance (ABF) continues to attract institutional interest for its scale, diversification and differentiated yield, and is becoming more specialised, with dedicated funds for sub-strategies such as asset-based lending, maritime and litigation finance. Rated note feeders are a common feature for US insurers and increasingly relevant in the UK, although rating agencies generally require well-defined investment parameters, making very broad blind-pool ABF mandates ill-suited to that structure. Opportunistic credit and capital solutions, which sit between direct lending and special situations, are increasingly separated into targeted products. Fund finance and NAV lending has grown as extended holding periods and slower exits across private equity have made it a strategic liquidity solution, while private credit managers are establishing dedicated secondaries strategies to provide LP liquidity and portfolio management.
The article identifies several governance and operational challenges. The "boundary problem" concerns where one strategy ends and another begins; overly broad mandates risk overlapping products and allocation conflicts, while overly narrow ones may hinder efficient deployment. Allocation of deals across accounts affects deployment speed and can carry commercial implications where vehicles have different economic arrangements. Transaction-level conflicts, where affiliated vehicles hold different levels of a borrower's capital structure, become more pronounced in restructurings and enforcement, though the article notes this is often more of an issue for other creditors. Cannibalisation arises when new products, such as an evergreen direct lending vehicle, draw capital from closed-ended funds. Governance frameworks designed for a few commingled funds may be ill-suited to multi-strategy platforms, where the growing number of interactions between products is the core challenge. Macfarlanes notes that managers' success increasingly depends on operational compatibility with investors and distributors, with strong returns necessary but no longer sufficient alone.
Platform expansion is occurring across both strategy and structure. Asset-based finance (ABF) continues to attract institutional interest for its scale, diversification and differentiated yield, and is becoming more specialised, with dedicated funds for sub-strategies such as asset-based lending, maritime and litigation finance. Rated note feeders are a common feature for US insurers and increasingly relevant in the UK, although rating agencies generally require well-defined investment parameters, making very broad blind-pool ABF mandates ill-suited to that structure. Opportunistic credit and capital solutions, which sit between direct lending and special situations, are increasingly separated into targeted products. Fund finance and NAV lending has grown as extended holding periods and slower exits across private equity have made it a strategic liquidity solution, while private credit managers are establishing dedicated secondaries strategies to provide LP liquidity and portfolio management.
The article identifies several governance and operational challenges. The "boundary problem" concerns where one strategy ends and another begins; overly broad mandates risk overlapping products and allocation conflicts, while overly narrow ones may hinder efficient deployment. Allocation of deals across accounts affects deployment speed and can carry commercial implications where vehicles have different economic arrangements. Transaction-level conflicts, where affiliated vehicles hold different levels of a borrower's capital structure, become more pronounced in restructurings and enforcement, though the article notes this is often more of an issue for other creditors. Cannibalisation arises when new products, such as an evergreen direct lending vehicle, draw capital from closed-ended funds. Governance frameworks designed for a few commingled funds may be ill-suited to multi-strategy platforms, where the growing number of interactions between products is the core challenge. Macfarlanes notes that managers' success increasingly depends on operational compatibility with investors and distributors, with strong returns necessary but no longer sufficient alone.
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