Roundtable 'Private Credit'

December 8, 2025

 

MODERATOR: Harry Geels, Auréus   PARTICIPANTS: Sam Foster, PIMCO Boris Harmsen, Pemberton Asset Management Jos Kalb, Cardano/Mercer Cyrus Korat, DRC Savills Investment Management Louay Mikdashi, Neuberger Berman Shelley Morrison, Aberdeen Investments Cyril Roblin, AXA IM Alts Jorg Sallaerts, Arcmont Asset Management Robert Scheer, M&G Investments Rajesh Sukdeo, Achmea Mortgages

 

How big is the market in Europe compared to the United States? And is there private credit in emerging markets?

Cyrus Korat: 'The real estate debt market, particularly commercial mortgages, is worth approximately $1.25 to $1.5 trillion. However, it is a rather opaque market and therefore suffers from a lack of reliable statistics.'

Sam Foster: 'We currently estimate $1.7 trillion in private credit AUM worldwide, of which approximately $1.1 trillion is in the US, $500 billion in Europe and $100 billion in the rest of the world. Until now, the majority of this has been corporate direct lending, but we are now starting to see a shift to other areas, such as asset-based finance, which we believe could stimulate strong growth in the coming years.'

What sub-segments are we talking about? What are the latest niche markets?

Robert Scheer: 'You can break it down however you like. In the direct corporate loan market, for example, you can have segments based on the size of the target companies, the risk tolerance of the strategy, geographical focus, sector focus, and so on. You can also look at newer forms of private credit, such as ABL.'

Foster: 'We distinguish between three areas: corporate credit, asset-based finance and commercial real estate credit. Asset-based finance is basically everything that falls outside the more traditional corporate or commercial real estate credit: from mortgages for homes to consumer loans, financing of aircraft and digital infrastructure, but also intangible assets such as subscription lines, music rights and royalties.'

Shelley Morrison: 'The global market for Fund Finance is estimated at around one and a half trillion dollars. We often describe this as the largest asset class that investors have never heard of. There is still plenty of room for institutional investors to increase their market share.'

Jorg Sallaerts: 'Certain asset classes are growing faster than others. From a private credit perspective, the vast majority are still engaged in senior direct lending, but a few additional strategies have also emerged. We have also seen more opportunistic or complex senior lending strategies appear on the market.'

Rajesh Sukdeo: 'We have seen the mortgage lending asset class grow significantly in recent years. The annual turnover in volume exceeds one hundred billion, so it is a fairly large market. Banks still play a very important role in this area, but non-bank lenders are now established players in this segment and are becoming increasingly important.'

What is the typical (fund) structure in private credit? What is your opinion on evergreen structures?

Boris Harmsen: 'Direct lending is a less liquid asset class and was previously only available through closed-end funds. In recent years, however, new structures have been developed that meet the needs of different investors and sometimes offer (limited) liquidity.'

Korat: 'Debt is very suitable for evergreen structures because of its fixed term. Real estate is a textbook example of when open-ended funds do not work. As debt managers of an evergreen fund, we do not have to actively decide what to sell in the fund to generate liquidity for certain investors. Real estate managers do have that problem.'

Morrison: 'I am a fan of evergreen structures for private credit. Some of the concerns reported about conflicts of interest in evergreens are exaggerated. Many of these alleged conflicts of interest or concerns about liquidity matching, for example, can, I believe, be easily avoided by a more creative or innovative fund structure.'

Foster: 'In general, we believe that well-structured evergreen vehicles can offer attractive, streamlined solutions for clients seeking fully funded exposure to diversified portfolios without the need for capital calls. This allows them to continue investing for the long term and grow their returns, while maintaining potential access to liquidity. However, it is crucial that managers focus on delivering results for these investors, rather than simply providing access or accumulating assets. In this regard, we see three key risks: maintaining discipline in terms of size and capacity, ensuring sound asset-liability management, and managing valuations, particularly when investors can subscribe and redeem at NAV.'

Louay Mikdashi: 'An illiquid asset cannot be converted into a liquid asset, and investors must proceed with caution. The aim is to reduce the mismatch between assets and liabilities, while providing all investors with efficient access. We expect the evergreen structure to be a key driver of growth within the asset class over the next ten years or so.'
 

We expect the evergreen structure to be a key driver of growth within the asset class over the next ten years.

 
Jos Kalb: 'Valuation is important because it determines the costs charged. If the valuation is too high, this not only affects investors who want to exit, but also the management costs. So there needs to be proper oversight of how valuations are determined.'

Are there typical partnerships, for example with banks and private equity, when structuring deals? What are the drivers for these collaborations?

Mikdashi: 'The relationship between banks and private credit managers is not a zero-sum game. Although competition in areas such as traditional commercial lending has increased, there are still significant opportunities for collaboration. For example, banks continue to offer storage facilities that support private credit transactions in various sectors. As banks increasingly adopt open architecture models, we believe that both banks and private credit capital can grow and be successful together.'

Harmsen: 'If you want to invest in private credit as an institutional investor, you need to make sure you choose a manager who can deploy capital locally and has a physical presence in the various countries. You need to look at the size of the team in relation to the amount of capital raised and in relation to the size of the investment opportunities. If those three elements are in balance, you are probably dealing with an attractive value proposition. To be a valuable partner for private equity and for the limited partner, a private credit manager should be able to do everything themselves. You need to be able to raise your own capital, source deals yourself and manage that capital throughout the term of the loan, in good times and bad. I think the market is indeed starting to mature. You see managers raising larger funds. More than 80% of the mid-market is now financed by private lenders, and no longer by banks. Incidentally, banks have been withdrawing from this market for years.'

Sallaerts: 'I think that both banks and direct lenders have a role to play when it comes to the European private credit markets, which are indeed less efficient than those in the United States. This is still evident from the attractive returns we can achieve in Europe today compared to the American market. But there is no escaping the fact that the private credit market has experienced tremendous growth over the past fifteen years, because private equity funds appreciate the flexibility, speed and capital strength of our solution.'

Scheer: 'From an investor's perspective, I would have my doubts about investing in a fund that depends on banks as its origination channel. Potential conflicts of interest lurk around every corner. Will the bank show me the best deals it generates as a bank?'

Cyril Roblin: 'Regardless of the role banks play in syndicated loans, it is crucial that sourcing is done independently. We have the ability to arrange or co-arrange financing for our transactions ourselves. We even have our own exclusive sourcing, which is an important part of our business. It is really fundamental to ensure that we are not dependent in terms of sourcing and that we can find the best opportunities.'

What do institutional investors cite as the main reasons for investing in private credit and what do they see as the main general risks?

Korat: 'Investors believe that this market has something to offer that they cannot get on the public markets, namely extra returns and access to underlying assets that are not directly available. They try to get more return from illiquidity than from taking absolute risk.'

Kalb: 'Pension funds and insurers are indeed allocating to private credit markets because it yields higher returns. Private credit is still relatively new, and they are also looking for ways to identify where to focus within private credit. Another important factor is that private credit offers opportunities to make an impact.'

Morrison: 'Investors are attracted to the potential for superior risk-adjusted returns that the asset class offers. It’s about diversifying credit risk, investing in a form of credit that doesn’t correlate with anything else. It’s about insulating their more liquid portfolios from market volatility.'

Korat: 'I think investors’ biggest concern is probably valuation and transparency. Investors want to feel that they can monitor the risk they have taken and detect when the quality of the investment is deteriorating. That is still quite difficult to do.'
 

Investors want to feel that they can monitor risks and detect when the quality of an investment is deteriorating.

  
Foster: 'The question that I think will come up more and more is whether investors are being adequately compensated for the liquidity risk they are taking. As a large active manager of fixed income and private credit, we always think about relative value and strive to offer investors appropriate compensation for the risks they take.'

Morrison: 'One thing that investors are increasingly concerned about is complacency in terms of underwriting and credit standards and discipline. As more liquidity has shifted into the private credit asset class and institutional capital has entered this bank-led market, we are seeing a general easing of credit terms across the asset class, with much less rigorous legal due diligence than before.'

Private credit ratings are mainly provided by smaller rating agencies. How good is the quality of their ratings?

Roblin: 'There is no public information, but we can gather detailed information, usually in niche markets. For example, we can access due diligence material, we can hold discussions with management, we can hold Q&A sessions. On the one hand, we need much more tailor-made credit analyses and, on the other hand, there is also the aspect of structuring transactions, which means that we need robust managers who are able to structure the transactions correctly. Our internal rating methodology is the result of all the credit analyses we have made and is used more as a benchmark.'

Sukdeo: 'In the more established asset classes, such as mortgages, there is a long history of data. Models have been tested during various recessions. That is somewhat reassuring, but of course you don't know how these models will perform if you end up in a serious recession.'
 

When business managers see the positive effect of an ESG strategy, for example a reduction in staff turnover, ESG becomes a business necessity.

 
Harmsen: 'We work with an external rating methodology that is specifically tailored to the European mid-market, a segment whose defaults we have been monitoring for decades. We manage capital for many European insurers and offer them complete transparency, which is made possible by this rating methodology.'

Foster: 'The quality of ratings varies, but in our opinion, no rating can replace a robust bottom-up credit assessment. With more than five decades of experience in public markets, we recognise that ratings from rating agencies are often outdated and that independent research can lead to a more nuanced picture. Investors structure transactions to meet rating requirements rather than purely on economic merits, which can distort pricing and make some investments less attractive. Rather than competing for overvalued assets, we seek to take advantage of these dynamics by purchasing private, unrated assets that offer higher returns due to the lack of a rating. We then structure them into rated instruments that can be sold to investors who require ratings. This allows us to capture the rating premium while retaining control over underwriting and structuring.'
 

The quality of ratings varies, but in our view, no rating can be a substitute for a robust bottom-up credit assessment.

 
Kalb: 'For our clients, we like to perform a scenario analysis to look at the overall portfolio context. This helps them to think about the risks they are actually exposed to. It also gives them insight into which assets are performing best or worst and to which asset classes they should allocate more or less.'

Is the default rate in private debt underestimated by non-accrual loans and payment-in-kind (PIK) loans? What is the actual default rate and how can we prevent losses?

Scheer: 'The market is very opaque. I think the default rate is slightly higher than is generally thought. It is right to be concerned about this. Unlike in the past, when documentation was stricter in certain areas of the market, it now seems as if the risk of default can be shifted considerably into the future. The moment when you, as a lender, can intervene may be a long way off.'
 

The market is very opaque. I think the percentage of defaults is no higher than is generally thought. It really is something to be concerned about.

 
Harmsen: 'Investors are best advised to choose managers who can clearly show how many defaults there have been and how leverage has developed. At our company, every interest rate increase or deterioration in leverage leads to a downgrade in the internal rating. The asset class has been severely tested in recent years by rising interest rates, inflation and political instability. How managers have dealt with these challenges clearly shows who really masters the profession.'

Many investors take relative valuation into account. How does that work in practice?

Mikdashi: 'The rule of thumb is simple: if you can get the same price or the same thing on the public markets, there is no reason to choose private markets. Price discipline is essential, but often difficult to achieve. Long commitment periods in private markets can put pressure on managers to become ‘forced buyers’ within their sector, limiting their ability to assess relative value. A more flexible, results-oriented investment strategy – one that looks beyond rigid sector labels – could help address this limitation. We call this the flexibility premium.'

How can (private) credit providers support companies in their growth trajectory?

Roblin: 'Firstly, we can offer bullet financing, which is suitable for companies that want to develop by using their cash flows to invest rather than to repay debt. But we also have the opportunity to share knowledge, best practices and an extensive network with the companies we support and work with. This network usually forms the basis for business opportunities.'

Harmsen: 'I think it is useful for a company to have a single lender, a party that acts as a true partner, understands your business model and can support you along the way. This speeds up decision-making in more difficult situations, thereby preserving more value.'

What are the main challenges for investors in gaining access to the private credit spectrum?

Foster: 'Investors today are very inclined to invest in corporate direct lending, a variable-rate asset class that is becoming increasingly popular and may come under pressure in a weaker macroeconomic environment, both from falling base rates and rising defaults. In public credit, diversification has long been the norm. Few would hold only bank loans without supplementing them with investment grade or securitised loans. We believe the same principle applies to private markets. Asset-based finance offers an attractive alternative, combining fixed and variable interest rates with hard assets as collateral, repayment-related cash flows and access to less crowded segments where spreads and terms may be more attractive.'

Scheer: 'The first challenge we need to overcome is the realisation that there are different nuances, even within the smaller world of commercial lending. We need to be sure that we are speaking the same language when talking to investors or clients. We often lose track because everyone uses different words for the same thing.'

Mikdashi: 'I agree that small to medium-sized private loans are generally more sensitive to the economic cycle. On the other hand, some sectors within the broadly defined asset-backed lending sector may have a different beta relative to the economic cycle, allowing investors to achieve broader diversification benefits.'

Korat: 'Commercial real estate credit is still struggling to find its place within asset allocation. Real estate investors often see it as a credit product, while credit managers consider it part of real estate. As a result, it can be overlooked in portfolios, even though it scores well with a more attractive spread and relatively low risk.'

What about the size and flexibility of the deals? Do we need large managers or (sector) specialised niche players?

Sallaerts: 'Private credit is an established asset class in which there has been a shift towards scale. The top five managers, including us, currently manage almost half of the total capital under management in the market. It's about finding opportunities where you can add value, with the size of your team and your track record enabling you to act appropriately. It is easier to do that if you have a larger team and if you also have a local perspective in all the regions in which you operate. That is not only important in the Netherlands and Belgium, but throughout Europe. Our network is everything. It is not about who you are as a person, but who you know and what you do with that. The customer, in this case the investor, always comes first.'

Harmsen: 'The key to a manager's success lies in creating value by finding a balance between the size of the origination and portfolio management team, the investment opportunities in a particular market and the amount of capital that investors entrust to the manager. Selecting the right investment is a human task. The manager needs to know exactly what is happening with the investment, and that cannot be automated at this point in time.'

Scheer: 'I think there is room for both large managers and smaller players. You can have smaller, specialised players that focus on a particular niche, a particular part of the capital stack, particular countries, but then of course they are not suitable for every investor. Larger managers are naturally more diversified. As the market continues to consolidate and a limited number of players control the market, investors are becoming more concerned about whether they are paying fees to a manager who is ultimately only buying the market beta.'

Kalb: 'In general, the winner takes all. The largest managers receive the most allocations, which makes sense because the quality of their network is essential for closing good deals. But niche players can also have an advantage, namely that they can make more of an impact.'
 

The largest managers receive the most allocations, which makes sense because the quality of their network is essential for closing good deals.

 
Is private credit suitable for ESG or making an impact?

Korat: 'Yes. We see considerable potential for impact in commercial real estate credit, given the large carbon footprint of the real estate sector. Real estate debt can be a powerful way to invest responsibly. Our focus is therefore on financing redevelopment and renovation projects that make buildings more efficient and sustainable. Without compromising on returns, we can stimulate positive change.'' 

Harmsen: 'Especially in the mid-market segment, lenders have the opportunity to work closely with their borrowers and to exert real influence in that relationship. This allows you to encourage borrowers to improve their ESG strategy and to make agreements to achieve measurable impact.'

Roblin: 'It's about how we, as managers, can help companies improve their ESG journey and bring about real transformations. This can be done, for example, through our ESG teams, providing ESG training and organising sustainability events.'

Sallaerts: 'In addition to our senior credit fund, our flagship product, we launched a special European impact fund earlier this year. We use external, independent, non-profit consultants to verify the investments made in the fund and to prevent any form of greenwashing, including borderline cases of what constitutes impact and what does not. We also include impact-oriented KPIs in the documentation, because this enables us to encourage and motivate private equity funds to do the right thing.'

Morrison: 'It is essential that the selected KPIs are relevant to the business strategy and have a real impact on bringing about positive change. They must be ambitious and challenging targets that are not easy to achieve. I have become rather cynical about ESG margin ratchets where the manager only goes for the low-hanging fruit.'

What is the driving force behind this? Is it the investors, or is it the companies themselves that want to be more sustainable?

Sukdeo: 'I think society is actually the driving force here. Mortgage lending gives you more opportunities to play a role in sustainability because you have more direct contact with consumers and can influence them.'
 

It's about diversifying credit risk, investing in a form of credit that doesn't correlate with anything else.

 
Morrison: 'The private credit markets clearly see that taking ESG risks ultimately has a significant financial impact on the return on investment. Regardless of whether a private lender pursues an impact strategy or follows Article 8 or 9 of the Paris Agreement, when lending to private market funds, we are seeing a growing trend among investors to integrate ESG throughout their investment process. They are successful in this and are leading the sector in terms of best practices.'
 

Mortgage lending gives you more opportunities to play a role in sustainability because you have more direct contact with consumers.

 
Kalb: 'Some pension funds and insurers want to make an impact and also achieve a market-based return. Private credit managers need to focus on the intentions of borrowers. Do they really want to make a change in terms of sustainability, or do they just want to achieve certain ESG targets?'

What can help to make more of an impact? Different or better regulation and legislation, better ratings, involvement of DFIs, or perhaps moving into emerging markets?

Kalb: 'The greatest impact can, of course, be achieved in emerging markets, because that is where the financing gap to achieve the SDG targets is greatest.'0

Roblin: 'We are seeing political backlash, particularly in certain regions, which may stem from regulatory uncertainty or cultural reluctance. It may also be due to short-term economic pressures. Incidentally, Europe is generally in favour of ESG, and European asset managers have a better understanding of the need to address sustainability issues. Perhaps the best way to avoid headwinds is to demonstrate that an ESG approach works. When business managers see the positive effects of an ESG strategy, such as a reduction in staff turnover, ESG becomes a business necessity.'
 

Especially in the middle segment of the market, lenders have the opportunity to be close to their borrowers and to actually exert influence in that relationship.

 
What are the latest developments in private debt and what does the future look like?

Morrison: 'Within the private credit market, investors are increasingly demanding customisation. They are asking managers to put together tailor-made portfolios that are aligned with their specific objectives, so that everything can be covered from a specific risk level, target return, liquidity level, investment term, and so on. This trend will increase in the coming years.'

Foster: 'Private debt markets are changing rapidly, with increasing convergence between public credit and private credit and a shift towards more diversified, actively managed strategies. While traditional direct lending is under pressure from tighter spreads and rising defaults, investors are increasingly turning to asset-based finance. We see strong long-term potential in sectors such as housing and digital infrastructure, areas with resilient demand and structural capital needs. These segments offer sustainable income and the opportunity to generate alpha through disciplined underwriting and thoughtful structuring.'

Mikdashi: 'Private credit is no longer “the land of boredom”. It is now one of the most dynamic sectors in the financial markets, with rapid growth, increasing specialisation and greater flexibility.'

Scheer: 'The direct lending market will become increasingly technical and efficient. One of the consequences of this is that the premium you receive, especially on loans to large companies, will continue to decline. Investors will consider two important factors: does the strategy I am investing in offer sufficient alpha relative to the market beta, and does that strategy offer a certain distinguishing factor?'
 

I think private debt is becoming a cornerstone of modern investment portfolios: more and more capital is constantly flowing into the market.

 
Sallaerts: 'I think private debt is becoming a cornerstone of modern investment portfolios: more and more capital is constantly flowing into the market. The allocation, which for many investors is now between 8% and 18% of their total portfolio, will, I think, increase further because the risk-return ratio is incredibly attractive.'
 

SUMMARY The size of the private credit market is estimated at over $1.5 trillion worldwide. However, there is a lack of reliable statistics. If you want to invest in private credit as an institutional investor, you need to choose a manager who can deploy capital locally and has a physical presence in the various countries. Investors are attracted to the potential for attractive risk-adjusted returns offered by private credit. Private credit is one of the most dynamic sectors in the financial markets, with rapid growth, increasing specialisation and greater flexibility. Private credit providers can encourage their clients to improve their ESG strategy and achieve measurable impact.

 

Harry Geels Harry Geels works at Auréus as a Senior Investment Advisor. He is jointly responsible for researching and selecting investment funds. He is also Deputy Editor-in-Chief of Financial Investigator. In addition, he is a part-time lecturer at the Actuarial Institute. Geels obtained his Master's degree in Financial Economics from VU Amsterdam in 1994. He writes his columns for Financial Investigator in a personal capacity.

 

Sam Foster Sam Foster is Vice President and Product Strategist at PIMCO in London, focusing on PIMCO’s alternatives strategies. He has been with the organisation since 2018. He has seven years of experience and holds a BSc in Economics from the University of Bath. He is a CFA charterholder.

 

Boris Harmsen Boris Harmsen is Managing Director, Head of Origination, Europe at Pemberton Asset Management. Prior to joining Pemberton in 2019, he worked at Deutsche Bank, where he was responsible for leveraged finance and sponsor coverage in the Benelux. He has over 15 years of experience in leveraged loans, credit and private equity, and has held senior positions at Egeria, Deutsche Bank and ABN AMRO. Harmsen holds an MSc in Law from the University of Groningen.

 

Jos Kalb Jos Kalb is Senior Portfolio Manager Impact Investing at Cardano/Mercer. He is involved in research and due diligence relating to impact managers who focus on a wide range of private market strategies. Kalb holds an MSc in Technical Informatics from Eindhoven University of Technology and an MSc in Econometrics from Tilburg University. He is a CFA and CAIA charterholder.

 

Cyrus Korat Cyrus Korat has over 29 years of experience in real estate and debt capital markets. Prior to joining DRC Capital (now DRC Savills Investment Management), he was Managing Director at Merrill Lynch & Co., where he worked as a senior risk taker in various disciplines, including ABS/mortgage trading, credit exotic trading and illiquids. He holds a BSc in Banking & Finance from Loughborough University.

 

Louay Mikdashi Louay Mikdashi joined Neuberger in 2022 as Head of Multi-Sector Private Credit. He leads portfolio management, business and strategic activities for multi-sector private credit opportunities. Prior to this, he held positions as Head of Opportunistic Alternatives at BlackRock EMEA and Global CIO of Alternatives at Santander Asset Management. Mikdashi is an alumnus of Harvard Business School, Boston College, Babson College and HEC.

 

Shelley Morrison Shelley Morrison is Head of Fund Finance at Aberdeen and responsible for investing institutional capital in debt facilities at fund level. She joined Aberdeen in 2019 from RBS, where she held the position of Director of Funds Banking. Morrison is a member of the executive committee of the Fund Finance Association EMEA and is part of Women in Fund Finance.

 

Cyril Roblin Cyril Roblin is Director in the Capza Artemid Private Debt team at AXA IM Alts, which focuses on the (sustainable) financing of small and medium-sized enterprises in Europe. He previously worked at Société Générale, Ardian Private Debt and Aforge Degroof Finance, among others.

 

Jorg Sallaerts Jorg Sallaerts is Head of Benelux at Arcmont Asset Management. Prior to this, he worked at Ares Management to expand the Benelux franchise. Before that, he held various positions at ING, mainly in leveraged finance in Amsterdam and London. Sallaerts holds an MSc in Finance from VU Amsterdam and a BSc in Business Administration from Radboud University in Nijmegen.

 

Robert Scheer Robert Scheer joined M&G Investments in 2022 as Co-Head of Private Credit Origination. He focuses on initiating and executing direct credit investments in the mid-market segment in continental Europe, with a particular focus on the DACH region. Scheer holds a BSc in Business Administration from the Frankfurt School of Finance & Management, an MSc in Finance from INSEAD in Singapore and is an alumnus of IMD in Lausanne.

 

Rajesh Sukdeo Rajesh Sukdeo has been Portfolio Manager Mortgages at Achmea Mortgages since 2006, responsible for strategy, portfolio management and customer relations within the commercial and residential mortgage funds. Previously, he worked at OHV Capital Markets in fixed income sales and at SNS Securities on the fixed income desk. He holds MSc degrees in Finance, Monetary Economics and Real Estate Finance from Erasmus University and the University of Amsterdam.

Attachments

• FI-7 - 2025 - RT Private Credit.pdf