As traditional banks retreat from lending markets, Private Debt is stepping in to fill the gap. From nearing USD 2tn globally today, Private Debt’s assets are expected to reach USD 3.5tn by 2028. This is because Private Debt offers higher yields than public credit and is less sensitive to short-term market volatility, so works well as a portfolio diversifier.
In a new research paper ‘Private Debt at a turning point’ by Amundi, a leading European asset manager, authors Jean Baptiste Berthon, Senior Investment Strategist at Amundi Investment Institute and Thierry Valliere, Global Head of Private Debt at Amundi present an analysis of the asset class.
They note: “Growing allocations to Private Debt are driving some convergence with Public Debt, although both continue to exhibit distinct behaviours. The scale up of the market is driving partial convergence in risk perception and processes, yet material differences persist, notably the performance drivers, creating complementary, not fully substitutable, opportunities for diversified fixed income portfolios.
“Going forward, we’ll see more retail investors allocating towards private debt. This means the industry needs to evolve and develop new products and structures that are suited to retail investors’ needs. This includes evergreen funds, development of a secondary market, lower minimum investment requirements as well as enhanced reporting and fintech distribution to improve liquidity.”
Private Debt investors are navigating multiple ruptures at once. Industry-wise, it prepares to welcome new entrants. Cyclically, the asset class benefits from more stable credit conditions, but also faces shocks (trade wars, geopolitics) that impact deal flow. As portfolio diversification becomes more challenging, Private Debt will be even more in demand, but this growth must be managed by exploring new opportunities across regions and sectors.
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Key risks include overvaluation from competition, possible rising default from past vintages and risk from growing Payment-in-Kind use, fundraising uncertainty, more frequent liquidity stresses, and NBFI–bank contagion.
In perspective, the ongoing transformation of private debt is unlocking opportunities, from mainstream recognition and fintech-driven access to ESG integration, AI-powered innovation, and global expansion, which will reshape the market and drive growth across new borrower segments and emerging industries.
Private Debt is at multiple crossroads
From an industry standpoint, it is both mature, as it has grown significantly, but also at an early stage, as it is broadening access to new entrants, particularly retail investors. This will likely lead to increased competition and a focus on risk management.
From a cyclical standpoint, the surge in interest rates to combat extreme inflation is behind us. Private debt now benefits from more benign macroeconomic and credit conditions, although these are being unsettled by a series of shocks (trade wars, volatile capital flows, geopolitics), which affect deal-making and corporate issuance.
From an investor standpoint, portfolio diversification has become a major challenge and imperative. Diversifying assets with all-weather protection – including Private Debt – will be in high demand. Private Debt stands to benefit significantly but must manage growth, explore new opportunities across countries and sectors, and continue delivering performance without taking on additional risk.
