Sibylle Greindl
07 May 2026
US private debt: what is it all about?
The US private debt sector has a knack for colourful metaphors: the "canary in the coal mine" that stops singing just before a gas explosion, and the "cockroaches" that never appear alone… What does all of this mean from a European perspective, and what strategy should investors adopt?
Private debt: what exactly is it?
Private debt refers to all amounts lent directly by investors to private companies, with no intermediary of any kind. Companies access capital without going through a bank or the bond market.
These debt funds have always existed, but over the past 15 years they have grown considerably, gradually encroaching on the territory traditionally held by banks for loans to higher risk companies.
What is the difference between private debt and public debt?
Public debt is the financing that a state, region, or municipality raises from various lenders: banks, savers, pension funds, and institutional investors, primarily through bank loans, government bond issuances, and treasury bills.
Private debt, by contrast, is financing granted to a company by an investor outside the banking sector, outside the bond markets. It represents only a portion of debt that falls outside public channels: the portion that involves neither a bank loan nor a bond issuance. Private debt is relatively illiquid, traded over the counter, and subject to no form of regulatory oversight. Private debt and public debt are therefore not two perfectly opposing concepts.
What is the difference between private equity and private debt?
With private debt, the investor steps into the role of the bank, lending money in exchange for regular interest payments. With private equity, the investor purchases a stake in an unlisted company and becomes a joint owner. They share in the company's development with the aim of generating a capital gain on their initial investment and receiving any profits distributed.
How did private debt grow so large in the United States?
Private debt has enjoyed remarkable growth in the US in recent years, financing private companies to the tune of nearly USD 3 trillion. This surge was partly driven by uniquely American vehicles dedicated to private debt, commonly known as Business Development Companies (BDCs), in which any US resident can invest. These funds raise money from savers by promising periodic liquidity, then lend that money to companies over several years. As long as demand for this type of investment remains stable and money continues to flow in, this liquidity mismatch poses no problem, but the machine seizes up the moment the dynamic reverses.
Is there private debt in Europe?
Yes, and it is substantial. In Europe, private debt now exceeds €400 billion. Its rise followed the tightening of capitalisation requirements imposed on banks after the 2008 financial crisis, which led corporate borrowers to turn increasingly to private lenders. Retail investors in Europe cannot, however, access this asset class directly, as is widely possible in the United States. European investors in private debt are therefore institutional or qualified investors.
Why is private debt causing concern now?
The trigger for current concerns was the bankruptcy of First Brands Group, an automotive parts manufacturer financed to the tune of billions of dollars by private debt funds, whose financial misconduct came to light in autumn 2025. Its high profile collapse put private debt firmly in the spotlight. The rise of artificial intelligence has also added fuel to the fire by threatening the business model of software as a service companies, which have themselves relied heavily on private debt to finance their growth.
For years, private debt was a black box. Now that it is being opened, a string of unpleasant surprises is emerging. That has been enough to erode investor confidence and trigger a wave of withdrawals that has exposed the liquidity problems inherent in this asset class.
What is the liquidity situation in private debt?
Private debt funds lend to companies over the long term, while promising investors that they can retrieve their capital periodically, typically monthly or quarterly. At the first sign of trouble, investors find themselves facing funds that cannot honour their commitments. In practice, when funds lack sufficient liquidity to meet the volume of redemption requests, they are forced to freeze or restrict withdrawals. With these restrictions reaching their limits, they are also compelled to sell assets at fire sale prices, which only deepens uncertainty further.
As the climate of uncertainty drives investors to seek to recover their capital, several private debt funds have announced withdrawal freezes, including the largest among them, the listed company Blue Owl. But Blue Owl is not the only one sending troubling signals: New Mountain, with USD 60 billion in assets under management at the start of 2026, sold loans below the prices at which it had previously valued them, freeing up liquidity to repay its investors. Morgan Stanley's private debt fund has capped withdrawals, and Apollo, BlackRock, and other major names in the sector are in exactly the same position.
Are we back in 2007?
The situation echoes 2007 in real ways, though the underlying realities differ. It is tempting to draw parallels with the early warning signs of the 2008 crisis and fear a systemic meltdown. Jamie Dimon, CEO of JPMorgan Chase, has said: "Unfortunately, we did see this in '05, '06, '07, almost the same thing." Like the subprime crisis, private debt is now being sold to American retail investors with promises of liquidity that is simply not materialising. That said, the situations diverge in some important respects. The subprimes financed poor-quality loans for residential real estate. Private debt, by contrast, covers a far broader category: primarily companies, including software as a service businesses, but also real estate and infrastructure, backed by tangible collateral.
Moreover, the lessons of 2008 have been learnt. Banks are now subject to strict requirements covering, among other things, their liquidity reserves and risk management. This tighter framework may well have contributed to the rise of private debt, but it remains a safeguard for retail investors and the financial system as a whole. The goal is clear: to ensure that no single grain of sand can bring the entire machine to a halt.
For all his alarming remarks, Jamie Dimon has no intention of missing out on the attractive returns that private debt can offer: just a few months after his comments, in March 2026, JPMorgan Chase, acting as a fund manager, launched a new private debt fund to position itself in this high-yielding market.
How does the global stock market protect investors from market shocks?
The global stock market is not immune to disruptions in various sectors, or to the crises they may or may not trigger. History has consistently shown, however, that recovery follows every crisis, regardless of its magnitude. Between 2003 and 2023, the S&P 500 delivered an average annual return of 10%, despite deep crises that caused it to fall considerably further, most notably the 2008 financial crisis. By 2014, the index had already surpassed its level before the crisis. While the global stock market is impacted during a crisis, it always contains both losers and winners. When one sector plunges, potentially dragging others down with it, other sectors will sooner or later fuel the recovery.
How should investors position themselves in the face of market turbulence?
The investors who benefit most from recoveries are those who invest regularly and stay the course over the long term. By investing regularly, you benefit from rising markets and buy more for less when markets fall. You were there for the downturn. You will be there for the upturn. By adjusting your asset allocation to match your investment horizon, you give the market time to recover after a fall and position yourself to benefit fully from the rebound.
Finally, by investing in a diversified manner, you spread the risk and volatility inherent in stock markets: your investment contains the losers, yes, but also the winners, who, taken together, drive the growth of your portfolio. Your greatest asset as an investor is time. Put it to work by investing in, and staying invested in, the global stock market.
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