Private credit no longer “the land of boredom” (Roundtable Private Credit - part 3)

December 11, 2025

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

In part 3 of this roundtable discussion, the experts delve into the key challenges of private credit: how do investors gain access to the broad spectrum, what role do scale and specialisation play, and to what extent is the asset class suited to ESG and impact? They also look ahead to the trends that will shape the market in the coming years.

By Hans Amesz

This is part 3 of the report. You can read part 1 here and part 2 here. 

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.'

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.'