Asset Allocation 2026 – Private Debt

In 2026, private debt continues to consolidate as a major global asset class, supported by reduced bank lending activity and sustained demand. A less restrictive policy environment, moderating inflation, and improving demand conditions help support borrower fundamentals—yet recent high-profile credit events have reinforced the importance of risk discipline, underwriting quality, downside protection, and manager skill.

Looking ahead, the interest-rate outlook is cautiously favorable for borrowers, and a soft-landing/moderate-growth scenario can act as a tailwind for credit performance. At the same time, credit risk is beginning to normalize, and default rates are likely to rise gradually from unusually low levels—making selectivity and diversification increasingly critical. A meaningful refinancing wave and a looming maturity wall can expand the opportunity set, while a gradual recovery in M&A and private equity activity should remain broadly supportive for private debt financing demand.

We also highlight key themes shaping asset allocation across private debt strategies: maintaining meaningful exposure to high-quality direct lending as a defensive income anchor, complemented by opportunistic and special situations strategies in a more competitive lending environment. In parallel, evergreen private credit vehicles—particularly in direct lending and alternative credit—have gained traction as an access point to private markets, supported by structural features such as negotiated lending terms, seniority, and reduced mark-to-market volatility. Finally, incorporating private debt into portfolios can improve the risk–return profile by enhancing diversification and smoothing volatility within a balanced allocation.

Read the full report: HMC Capital Asset Allocation Report 2026 – Private Debt.

HMC Asset Allocation 2026 series:

Read the first report: HMC Capital Asset Allocation Report 2026 – Real Assets.

Read the second report:  HMC Capital Asset Allocation Report 2026 – Private Debt.

Read the third report: HMC Capital Asset Allocation Report 2026 – Private Equity.

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