Panel discussion 'Private Debt Portfolios'

November 20, 2025

_{This report was originally written in Dutch. This is an English translation.}

Diversification, scale, impact and the new pension system are determining factors for allocation to private debt. This became clear during the seminar on private markets organised by Financial Investigator, where four experts discussed the opportunities and risks of this asset class.

By Hans Amesz

Where should an investor who is new to this market start?

Menno van den Elsaker: 'The simple answer is: start with the largest and best-known sub-strategy, which is direct lending. In terms of product and analysis, this is also the closest to public high yield and leveraged loans. In 2014, we introduced our first European direct lending mandate, which we have expanded over time with other managers. We then added Real Asset Credit, Speciality Finance and Opportunistic Credit to build a truly diversified portfolio. It took some time to get private debt recognised as a separate asset class within the pension fund alongside traditional asset classes and to receive a separate allocation.

In 2020, we became completely separate, both legally and operationally, from the liquid credit team, for example, so that clients could allocate separately to alternative credit. To achieve this, I started formulating a strategy and drawing up business plans as early as 2017.'

Is it likely that private debt will deliver a more stable return in the long term?

Alex Neve: 'Yes, because you get less volatility and are therefore less dependent on market fluctuations. As a pension fund, you are a long-term investor and do not need to sell in the interim. Compared to private equity, less cash needs to be held, which means that the money can be deployed much more quickly. In IRR terms, private equity may seem better, but private debt is likely to deliver a better return.'

Jorg Sallaerts: 'Private debt only really emerged as an asset class after the global financial crisis of 2008/2009, when banks withdrew en masse from providing financing to (fast-growing) companies. Over the past seventeen years, private debt has been tested through multiple cycles, such as the Greek banking crisis of 2013, COVID-19, Russia's intervention in Ukraine and the subsequent period of high energy prices and cost inflation at the end of 2022, and Trump's series of tariff announcements and the ensuing macroeconomic instability earlier this year. Despite all this, private debt has shown a consistent track record over those seventeen years, with significantly better returns than some other asset classes.'

The current market is more or less dominated by a very small number of large players. Do you need to consider concentration risk?

Markus Schaen: 'Diversification in the portfolio is certainly necessary. At the same time, we have to deal with limitations in practice. During the first presentation of this seminar, it was explained that a diversified private debt portfolio requires ten to fifteen managers to achieve a portfolio of between two hundred and three hundred different companies. I don't disagree with that in principle, but the reality is now – and indeed in my previous job – that there would be a lot of resistance if I were to propose that we hire ten to fifteen managers.

I think it is more likely that you will end up with one or two direct credit providers in your portfolio, who have ten to fifteen companies in their own portfolio. With more managers, the chance of overlap in the portfolio also increases. You need to limit this risk, for example through contractual agreements. And you need to make sure that you are not exposed to the same companies in your private equity portfolio.
 

With private debt, you have less to do with volatility and are therefore less dependent on market fluctuations.

 
There is certainly a risk of less diversification or higher concentration in the portfolios, but you also see this on the managers' side, probably because the larger players are more successful at fundraising and are growing larger, causing a number of smaller players to be squeezed out and leave the market. So, once again, there is certainly a concentration risk on the managers' side, but also on the portfolio side.'

Van den Elsaker: 'If you look only at the statistics on fundraising within private debt, you see that these are dominated by a few large players. This certainly needs to be monitored. On the other hand, you have to look at what a manager can do with a larger fund – that can give these larger players a competitive advantage. They can then arrange financing packages that would normally be arranged by banks.

Given our size, we work with some of these larger players. But for our impact investments, for example, we also use some smaller players because they can offer specific expertise and customisation in that area. So for us, it's really about the added value that a manager can offer specifically.'

Sallaerts: 'According to the latest data from Preqin, the top five private debt managers, including ourselves, manage approximately 48% of the total outsourced assets in the private debt market. This indicates that certain track records are valued. People like a certain level of stability and are increasingly turning to scale. Think of the size of the investment team, the relationship management team and support services.

A manager must be well equipped to respond to every investor at any time of the day and be able to meet the ongoing and improved reporting requirements. In my view, it is therefore a good thing that many investors are opting for larger managers, because they have more skills and are better able to meet your requirements.'

Given the political uncertainty in the United States, is it wise to allocate more to Europe, particularly in private markets, where you are committed for a longer period?

Neve: 'Most of the pension funds I know are active in both Europe and the United States. Perhaps the question should rather be: should we do more in emerging markets? Many parties are probably underinvested there. However, the highest returns are still in the United States, so you don't benefit much from that regional diversification in terms of spreads. That said, regional diversification is always wise from a risk perspective. There are many other areas within private debt or direct lending in the United States in which you can invest in order to diversify. Away from exposure to companies, with, for example, infrastructure loans, consumer loans or insurance-linked securities, which I also see as a sub-category of private debt.'

We are transitioning to a new pension system. Will this have consequences for the allocation to and perhaps also for the allocation within private debt?

Van den Elsaker: 'Under the new pension contract, you have the protection portfolio, which must cover the obligations as much as possible, and the return portfolio. For most parties, this includes private debt together with high-yield bonds and emerging market debt. Based on risk and return, private debt looks attractive.

I am pleased that we already set up the entire infrastructure for investing in private debt in 2020, making it easier for our clients to increase their allocation now. In general, we expect pension funds to allocate more to private markets, including private debt, under the new pension system.'
 

I am pleased that we already set up the entire infrastructure for investing in private debt in 2020, making it easier for our clients to increase their allocation now.

 
Question from the audience: what needs to happen for the private debt market in Europe to grow?

Sallaerts: 'I think that growth has been going on for about ten to twelve years now, and the pace continues to accelerate. Private debt is now an established asset class in Europe. We are seeing investors allocating slightly more of their portfolios to Europe, and some are also looking more often for managers who focus exclusively on Europe.'

How important is it to consider sustainability and impact when selecting private debt investments?

Schaen: 'Much of what Dutch institutional investors do in private markets also has an impact focus. The assumption is that it is easier to achieve impact in a private market environment because, as a provider of equity or debt capital, you are in contact with the company. It is less anonymous than in a public market. In bilateral consultations with a company or together with a small group of other parties, it is normally possible to demand and achieve more in terms of impact and sustainability.'
 

Private debt has shown a consistent track record over the past seventeen years, with significantly better returns than some other asset classes.

 
Van den Elsaker: 'Compared to private equity, impact investments within private debt are still in their infancy. That led us to the decision to take a pioneering role in this area. That is why we started talks with a number of managers who already had a high ESG DNA. We discussed our impact framework with them: how to measure results, how to report, and so on. This involves an additional acceptance process for impact alongside the regular credit acceptance process. You now also have to carry out impact assessments on an ongoing basis. That is an extra activity that takes a lot of time and resources.

Managers need to find companies that have a measurable impact from a social or environmental point of view. Many companies are still focused on activities that reduce waste, which is good, but which we do not classify as impact. It's about delivering products or services that have an impact on the world.'