The private debt market is experiencing return moderation and declining lending volumes in early 2026. Increasing stress in specific vintages and sectors requires a cautious, selective approach to portfolio construction.
Key Takeaways
- 1.Direct lending returns have moderated and remain flat to slightly positive in 1Q26 amid market headwinds.
- 2.Lending activity and volumes are declining, with technology sector issuance falling as lenders shift toward healthcare and utilities.
- 3.Risk environments are deteriorating for smaller borrowers and junior loans, particularly those originated in 2021-2022.
Table of Contents
- Private debt
- Private debt in the current environment
- Positive drivers
- Negative drivers
- Considerations before investing
- Appendix
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Authors
Karim CherifRichard HuangAntoinette Zuidweg
Securities
Cliffwater Direct Lending Index
Themes
AI-driven disruptionReturn moderation
Regions
GlobalUnited States