What’s really happening in private credit?

Taken at face value, this coverage would suggest a decline in investor commitments to new private credit funds, but the past three months indicate otherwise.

• Ares Management reported a record fundraising quarter in Q2, with $23.7bn raised into credit strategies alone, making it Ares’ largest single contributor for the period.
• Barings announced a raise of more than $19bn for its global direct lending strategy.
• Hayfin Capital Management closed its latest direct lending fund above €15bn, significantly exceeding target size and more than doubling its previous vintage.
• Crescent Capital Group closed a $10.8bn direct lending fund, the largest fundraise in the firm’s history.

Notably, this capital is flowing into direct lending, which is the segment most frequently cited as being under pressure.

So, why is there a disconnect between sentiment and capital flows? Here’s what we think is happening.

Private credit and private markets more broadly continue to benefit from long-term structural tailwinds. Increasing investor demand for diversification and the maturing of private markets as a core portfolio allocation have solidified as key themes of the alternatives landscape.

Most institutional allocators commit over multi-year and often multi-decade horizons. This is the appropriate approach for less liquid strategies. Therefore, a challenging quarter, or several, does not necessarily alter the structural role these assets play within a portfolio.

Our Euroclear FundsPlace data indicates that, despite rising redemptions in parts of the market, net flows into private credit remained positive in H1 2026.

Some investors are redeeming where liquidity permits or limiting new allocations. This may be reducing competition for deals and strengthening the negotiating position of lenders that are still active in the market.

As a result, new commitments may be deployed with more favourable pricing and stronger lender protections than when capital inflows were higher. Ares Management, for example, has reported $170bn in dry powder – capital available for deployment – providing flexibility to be selective. It is also possible that managers are offering more attractive terms to investors in order to keep raising capital.

The fundraising figures suggest investors are differentiating between managers and strategies rather than making a broader retreat from the asset class. Instead of reducing exposure to private credit as a whole, investors may be ‘rotating’ commitments toward the managers and strategies that they trust the most to deliver in a challenging environment.

It is possible that the underlying state of the market is less negative than the market commentary suggests. As is often the case, investor behaviour offers a more reliable indicator than commentary alone.