SuperReturn International 2026: Private Credit in Focus

The Ropes & Gray team attended the SuperReturn International conference in Berlin last week. The week started with a focus on private credit, with a few key themes emerging across the panel discussions. 

A consistent message was that private credit is now a permanent third pillar of the credit markets, alongside broadly syndicated loans and high yield bonds. Borrowers benefit from certainty of execution and a close partnership with their lenders, and given the real need for borrowers to invest in AI, infrastructure, energy and defence, demand for private credit is likely to continue to grow. Overall, panellists characterised this period of heightened pressure as a healthy reset for a relatively new market experiencing growing pains.

“Dispersion” is the word of the day

A recurring view expressed across panels was that we are moving into a period of increasing dispersion in the performance of private credit asset managers. This is expected to result from a number of factors, including levels of exposure to software (estimated at 26% across private credit, which is disproportionately high), differing approaches to underwriting, including differing methods of valuing underlying businesses and collateral protection when calculating loan-to-value ratios, and diversification in capital formation and capital deployment. 

Sub-investment grade credits are more likely to be affected by market shocks, and it is here that differentiation between asset managers and credit outcomes will come through. Panellists noted that there is no evidence of a widespread portfolio quality issue. The trailing default rate as of January 2026 was 5.5%, and it is the trifecta of risk factors (redemptions, sector risk and systemic macro risk) that is causing the increased and sometimes unfounded interest of the media in the asset class. 

Scale and expertise are expected to be the driving differentiations between asset managers who built well-diversified and resilient portfolios focused on producing unexciting fixed income at target and the asset managers who got carried away pursuing growth in areas outside of their expertise.

Impact of non-institutional investors in private credit

Another theme that emerged was that the democratisation of the private credit asset class has resulted in a loosening of underwriting standards. Asset managers whose growth in recent years had been driven by retail investors may be more exposed to increases in the default rate, as they will have been under higher pressure to quickly deploy capital which did not leave enough time for credit scrutiny and thorough diligence and therefore may be more likely to have weakened underwriting standards and documentary terms.

Some observers expect these dynamics to compound with high retail redemptions to create heightened stress levels at the most exposed asset managers. It is an open question as to how long the redemption pressure will last, but credit fund structures are expected to move back towards what they were 10-15 years ago, with fund managers re-evaluating semi-liquid product structures. 

Documentary terms for lenders are expected to improve

The upcoming maturity wall for loans made at the height of the market in 2021 and 2022, combined with the liquidity squeeze created by increased redemptions, will create opportunities for well-positioned lenders to renegotiate and reprice risk, drive better documentary terms and be more creative in new instrument structures at all levels of the capital structure. For upper mid-market and large cap deals, the greatest change is that now that there may be liquidity constraints in the market, sponsors may need to work with a larger number of lenders to obtain capital, and those lenders may be less flexible about permissive documentation and excessive leverage. It may be that those sponsors and borrowers will find a better path to refinancing via the public markets. 

Core mid-market and lower mid-market remains the natural fit for private credit, given that those deals typically have wider pricing, lower leverage and tighter documentation, and it is expected that more direct lenders will be focused on those markets.

Sponsors are also increasingly focused on the source of capital of private credit funds. They invest in their relationships with private credit providers, so they are looking for assurance that they will have consistency of capital, and that providers will not be adversely impacted by the risk of redemptions or sector risk that could cause difficult fundraising or volatility in existing funds. This is expected to be a significant point of differentiation between private credit providers in the coming period. 

There will be winners and losers in the restructurings to come

Private credit asset managers that have focused on creating a diversified portfolio, with strong underwriting standards and appropriate leverage levels, as well as better documentary protections, will be relatively well-positioned if default rates rise. The asset managers that did not may lack sufficient resources to handle potential restructurings in the next two-to-three years. 

In addition, those asset managers that have strong private equity capability will be best positioned to make use of the full range of restructuring tools, including enforcement or debt-to-equity exchanges, given their operational turnaround expertise. This will also present secondary opportunities, because some private credit providers may need to exit their investments due to external or institutional factors, rather than due to the quality of the relevant underlying credit. It remains to be seen what negotiation challenges this may present in restructuring scenarios, as secondary investors buying into an instrument below par are likely to have differing return targets.

Growth in asset-backed finance and new frontiers

Private credit as an asset class is also expanding in its reach, with particular growth in asset-backed finance and fund-level leverage. Asset-backed transactions are seen as more resilient to AI disruption, with guaranteed cashflows and hard assets as downside protection representing an increasingly attractive proposition for lenders.

The rise in fund-level finance, which has partially been fueled by the backlog of M&A exits, presents a real opportunity for private credit, and the expectation is that this will grow in the near term. 

Please click here and here for more of our takeaways from the SuperReturn International 2026 Conference.

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