Key Takeaways
- • Macfarlanes reports that private credit, now matching the broadly syndicated loan market at approximately $1.8tn in global assets under management, is shaped in 2026 by capital solutions growth, sector rotation, distressed opportunities and deployment competition.
- • Direct lending fell to 50% of new LP allocations to private credit in 2024, down from 58% in 2023, while opportunistic and special situations strategies attracted growing allocator interest.
- • Record 2025 NAV lending fund closes totalled a reported $12.9bn, including 17Capital's $5.5bn Strategic Lending Fund 65 and Alpinvest's $4bn Strategic Portfolio Finance Fund II; 17Capital's $7.5bn Credit Fund 27 in 2026 is described as the largest NAV loan fundraise to date.
- • UBS warns default rates in US private credit could reach 15% in an aggressive AI-disruption scenario, well above stress projected for leveraged loans and high-yield bonds.
- • S&P Global Ratings projects speculative-grade nonfinancial debt maturities will rise from $309.2bn in 2026 to $942.3bn in 2028, creating a pipeline for distressed and special situations strategies.
Summary
Macfarlanes' latest analysis argues that private credit entered 2026 at a pivotal juncture. The asset class, now around $1.8tn in global AUM and matching the broadly syndicated loan market, faces economic uncertainty, geopolitical tensions and AI-driven disruption, which the firm says create both opportunities and challenges for flexible, opportunistic lenders.
The article identifies capital solutions as a major shift from niche to core offering. According to the report, direct lending accounted for 50% of new LP allocations to private credit in 2024, down from 58% in 2023, while opportunistic and special situations strategies drew growing allocator interest. Hybrid debt and equity structures have scaled as private equity sponsors face constrained exit markets. Macfarlanes describes a bifurcated borrower market, with many complex capital structures stemming from the 2018-21 LBO vintage. Premiums for bespoke solutions stem from structural, situational and documentary complexity. NAV financing is highlighted as a central tool: following the 2023 collapses of Silicon Valley Bank and Signature Bank, private debt funds have moved into a space historically dominated by banks. Record 2025 NAV lending fund closes totalled a reported $12.9bn, including 17Capital's $5.5bn Strategic Lending Fund 65 and Alpinvest's $4bn Strategic Portfolio Finance Fund II. The article notes 17Capital's $7.5bn Credit Fund 27 as the largest NAV loan fundraise to date and says the firm has raised $19bn for NAV finance since 2008, supported by its Oaktree partnership.
On sector rotation, the article points to European defence as a deployment opportunity. Citing KPMG's UK Financial Services Sentiment survey, it reports nearly two-thirds of financial services leaders expect more investment in UK defence in 2026. Technology and software present a more nuanced picture: AI tools that perform tasks software companies monetise have prompted reassessment of credit risk. UBS has warned that in an aggressive disruption scenario, US private credit default rates could climb to 15%.
On distress, Macfarlanes notes that new opportunistic vintages have raised more than $100bn over two years and are positioned for dislocation. It cites elevated consumer credit card delinquencies, accelerating auto loan defaults and decelerating labour momentum despite high-yield spreads near historic tights. Per S&P Global Ratings, speculative-grade nonfinancial debt maturities will rise from $309.2bn in 2026 to $942.3bn in 2028, with maturities rated 'B-' and below rising more steeply.
The article identifies capital solutions as a major shift from niche to core offering. According to the report, direct lending accounted for 50% of new LP allocations to private credit in 2024, down from 58% in 2023, while opportunistic and special situations strategies drew growing allocator interest. Hybrid debt and equity structures have scaled as private equity sponsors face constrained exit markets. Macfarlanes describes a bifurcated borrower market, with many complex capital structures stemming from the 2018-21 LBO vintage. Premiums for bespoke solutions stem from structural, situational and documentary complexity. NAV financing is highlighted as a central tool: following the 2023 collapses of Silicon Valley Bank and Signature Bank, private debt funds have moved into a space historically dominated by banks. Record 2025 NAV lending fund closes totalled a reported $12.9bn, including 17Capital's $5.5bn Strategic Lending Fund 65 and Alpinvest's $4bn Strategic Portfolio Finance Fund II. The article notes 17Capital's $7.5bn Credit Fund 27 as the largest NAV loan fundraise to date and says the firm has raised $19bn for NAV finance since 2008, supported by its Oaktree partnership.
On sector rotation, the article points to European defence as a deployment opportunity. Citing KPMG's UK Financial Services Sentiment survey, it reports nearly two-thirds of financial services leaders expect more investment in UK defence in 2026. Technology and software present a more nuanced picture: AI tools that perform tasks software companies monetise have prompted reassessment of credit risk. UBS has warned that in an aggressive disruption scenario, US private credit default rates could climb to 15%.
On distress, Macfarlanes notes that new opportunistic vintages have raised more than $100bn over two years and are positioned for dislocation. It cites elevated consumer credit card delinquencies, accelerating auto loan defaults and decelerating labour momentum despite high-yield spreads near historic tights. Per S&P Global Ratings, speculative-grade nonfinancial debt maturities will rise from $309.2bn in 2026 to $942.3bn in 2028, with maturities rated 'B-' and below rising more steeply.
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