Private Debt CIO View

The private debt market is transitioning to a lower-return environment characterized by tighter spreads and rising defaults in certain vintages. UBS anticipates a more balanced outlook where manager selectivity and sector focus (away from AI-disrupted tech) are paramount.

Key Takeaways

• 1.Direct loan returns are normalizing, falling to 9.0% in 2025 from previous highs of 11-12% in 2023-24.
• 2.Lending activity and fundraising are slowing, with capital raised in 2025 dropping 8% year-over-year to USD 221 billion.
• 3.Lenders are shifting focus from Technology (impacted by AI disruption) toward Health Care and Utilities.

Table of Contents

• Private debt in the current environment
• Positive drivers
• Negative drivers
• Considerations before investing
• Appendix
• Nontraditional Assets
• Risk information

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