2026 European Private Credit Outlook (Arcmont Asset Management)

Summary

• Private equity sponsors are sitting on around 5x more dry powder than their private credit counterparts.p.4
• Average all-in yields in the private credit mid-market during 2025 remained attractive at 9-10%.p.5
• In the first half of 2025, experienced managers raised 95% of capital dedicated to private credit globally and accounted for 78% of closed funds.p.6
• Total institutional investor allocations to private credit have grown by around 20% over the last decade.p.7
• Almost 90% of respondents to Preqin's investor intentions survey prefer to maintain or increase their private credit allocations.p.7

Key insights

1. Direct lending to middle-market businesses represents the largest segment of European private credit.p.3
2. Private credit now features prominently in sponsor financing discussions at the outset of transactions.p.4
3. The share of experienced managers among closed funds rose from 54% in 2015 to 78%, while their share of capital raised rose from 77% to 95%.p.6
4. 79% of direct lending underlying industries are defensive, versus 52% in the leveraged loan market.p.7
5. Global impact investing AUM reached $1.57 trillion, growing three-fold between 2018 and 2024.p.8
6. Special situations and capital solutions strategies are playing a growing role as sponsors face an exit backlog.p.8