Private Debt: What Are the Real Issues Behind the Common Misconceptions?
Recent discussions surrounding private debt have raised a number of questions. Higher risks, liquidity concerns, comparisons with past crises… Beyond the headlines, it is essential to distinguish perception from market reality.
Private debt remains a structural asset class, but more than ever, investors need to understand investment strategies, fund structures and liquidity mechanisms.
Misconception #1: "Private debt has become significantly riskier"
The current slowdown should not be interpreted as a deterioration in asset quality. In Europe, direct lending volumes are down 37% year-on-year, mainly due to a weaker mergers and acquisitions market. Nevertheless, acquisition financing still represents 64% of total deal volume year-to-date, highlighting private lenders' continued role in financing the real economy (PitchBook | LCD, European Private Credit Monitor, February 2026).
At the same time, institutional investors continue to increase their allocations. Global private debt assets under management have now reached $2.36 trillion, compared with approximately $500 billion in 2014, confirming the long-term structural growth of the asset class (PitchBook, Global Private Debt Report H1 2025).
The real challenge is not whether private debt remains attractive, but how effectively managers select investment opportunities.
Misconception #2: "The market is facing a liquidity problem"
Private debt naturally finances businesses over multi-year investment horizons. Illiquidity is therefore not a market flaw; it is an inherent feature of long-term financing.
Far from lacking capital, the market still holds $542.7 billion of dry powder, representing committed capital available for future investments (PitchBook, Global Private Debt Report H1 2025).
The real issue is not market liquidity itself, but whether a fund's liquidity terms are consistent with the underlying assets it holds.
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Misconception #3: "All private debt funds offer the same liquidity profile"
This is probably the most common misconception. Closed-end funds are designed to hold investments until maturity, whereas evergreen vehicles provide periodic liquidity through predefined mechanisms such as redemption windows, limits or gates.
This distinction is becoming increasingly important as evergreen funds continue to grow. During the first half of 2025, evergreen vehicles raised $86.4 billion, representing more than 50% year-on-year growth, with approximately 55% allocated to private debt strategies (PitchBook, Global Private Debt Report H1 2025).
Liquidity risk depends primarily on the structure of the investment vehicle rather than on the underlying assets themselves.
Looking Beyond the Headlines
Current market discussions do not fundamentally challenge the private debt asset class. Instead, they highlight the need to better understand fund structures, liquidity mechanisms and portfolio construction.
Today, analysing private debt requires more than assessing credit quality alone. Investors must also understand how investment vehicles are structured, how returns are generated and whether the liquidity profile matches their investment horizon.
Private Corner Credit Yield: A Core Private Debt Allocation
Discover how the fund combines two complementary private debt strategies managed by leading institutional investment firms.
Key Takeaways
Private debt continues to attract institutional investors. Illiquidity is a structural characteristic of long-term assets. Liquidity profiles depend on fund structures as much as on the underlying investments. CLOs remain a sophisticated strategy that deserves dedicated educational support.
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The information contained in this article is provided for information and educational purposes only. It does not constitute investment advice, a personal recommendation or an offer or solicitation to invest in any financial instrument. Investments in private markets involve risks, including the risk of capital loss, illiquidity and risks specific to the underlying investment strategies. Past performance is not indicative of future results. Before making any investment decision, investors should carefully review the fund's regulatory documentation, including the Key Information Document (KID) and the fund documentation available from Private Corner, and ensure that the investment is suitable for their financial situation, investment objectives and investment horizon.
