At SuperReturn Private Credit Europe 2026 in London this week, Auquan CEO Chandini Jain moderated a standing-room-only panel with four senior allocators: John Cantwell of the Ireland Strategic Investment Fund, John Bohill of StepStone Group, Marc Schreier of Baloise Asset Management, and Caroline Hedges of Railpen.

The session was billed as "The LP Lens: Insights on European Private Credit." What it actually became was a candid and pointed conversation about where private credit stands after years of rapid growth, and what LPs now expect from the managers they back.

Here's what stood out.

The golden age of private credit is over. The asset class isn't.

Every panelist agreed that the "golden age" narrative that dominated private credit conversations for the past few years has run its course. The headlines have shifted and media coverage has turned skeptical.

The consensus among panelists was that private credit as an asset class is structurally sound: companies are staying private longer, banks continue to retreat from mid-market lending, and floating-rate structures are generating cash flow near median private equity returns. For LPs, it remains an evergreen allocation, not a cyclical trade.

The nuance that came through is that the market is being stress-tested in ways it hasn't been before, and not all managers are passing.

Three risk fronts in private credit that LPs are watching

The panel identified three categories of risk that are shaping how LPs think about their portfolios right now.

The first is fundamental: macroeconomic weakness and underwriting deterioration. Higher rates, geopolitical instability, and sector-specific pressures (particularly in software and consumer) are testing whether the loans underwritten in the past few years were priced correctly for the environment we're in now.

The second is AI-related valuation risk. This isn't about AI in operations. It's about enterprise valuations built on AI growth assumptions flowing through leveraged buyout portfolios. If those valuations correct, equity absorbs the hit first, but debt isn't immune, particularly at higher leverage multiples.

The third is liquidity mismatch. Semi-liquid fund structures that offer periodic redemptions while holding illiquid private loans have come under pressure. When redemption requests exceed what the underlying portfolio can support, the structure breaks. LPs with long-term, closed-end commitments and conservative leverage (one panelist cited average entry leverage of 3x EBITDA compared to 6x at the larger end) noted they aren't seeing these stress signals in their own portfolios. But the risk is real for others, and the market is watching.

The opportunity set for private credit is broadening

Direct lending still dominates European private credit, but LPs are looking beyond it.

Asset-backed lending came up repeatedly as a high-growth area with an expanding set of collateral types, from royalties to shipping to data center infrastructure. The opportunities are real, but the risks are varied and unfamiliar. A 30-year bond against a data center, for example, carries very different risk characteristics than a 5-year senior secured loan to a mid-market industrial company.

Credit secondaries also attracted significant attention. Dislocation in the broader market is creating buying opportunities, and LP dry powder is being deployed to provide liquidity and acquire positions at discounts. Some panelists noted that certain US BDCs are trading at yield levels not seen since the global financial crisis, which is creating entry points that simply didn't exist two years ago.

European credit, specifically, was seen as attractive relative to the US. Less political uncertainty, a stronger structural tailwind from continuing bank retreat, and mid-market companies that are regionally focused rather than exposed to cross-border tariff risk were all cited as reasons to favor European allocations.

What LPs want from private credit managers now

LPs are raising the bar, and they're specific about where. This was the sharpest part of the conversation. The through-line: LPs want GPs to treat them as partners, not counterparties.

Communication and transparency. LPs want to hear about problems early, clearly, and consistently. Several panelists noted that smaller pension funds and institutional allocators are overwhelmed by the sheer volume of capital calls, distribution notices, and reporting. The operational burden on LPs is growing, and GPs that aren't sensitive to it are creating friction in the relationship.

Operational capacity. The ability to scale, meaning more deals, faster timelines, bigger portfolios, without sacrificing diligence quality, is becoming a real factor in allocation decisions. The panelists discussed how organizational changes at GPs, once considered a red flag, are now so common due to industry consolidation that they've become a baseline consideration rather than a disqualifier. What matters more is whether a GP can actually execute at the pace the market demands.

Fee discipline. This topic generated the most energy. Panelists pointed out that parts of direct lending have become commoditized, and the convergence with public credit markets means that PE-style fee structures are increasingly hard to justify. When leveraged loans cost 20 basis points and a direct lending portfolio costs 2%, the illiquidity premium shrinks fast. The market is moving toward equilibrium, with GPs adopting a basis-point mentality, particularly as they pursue evergreen and permanent capital structures.

Deeper look-through. LPs want to see into the underlying portfolio, not just receive summary reports. They want to understand their risk exposure across managers, across sectors, and across portfolio companies. And they want it in close to real-time, not quarterly.

The infrastructure gap in private credit

One of the more revealing moments was when the conversation turned to technology and data infrastructure. The panelists were candid: LP monitoring processes are still largely manual and institutional. One described it as "precision engineering" built on old-school quarterly processes. Another mentioned using AI tools like Copilot to pre-screen RFP responses, but emphasized that the real diligence work still happens by hand.

This honesty is important context. The volume and complexity of private credit continues to grow. The asset class is broadening into new collateral types and strategies. Portfolios are getting bigger. LP reporting demands are intensifying. And the infrastructure most firms use to manage all of it hasn't kept pace.

For GPs, the implication is clear: LPs are paying attention to how you operate, not just what you invest in. The ability to screen deals faster, monitor portfolios more deeply, respond to LP requests more quickly, and maintain diligence quality at scale is moving from a "nice to have" to a competitive requirement.

The firms that figure this out will win more allocations. The firms that don't will lose them to competitors that can demonstrate operational leverage alongside financial leverage.

While you're here

This is exactly the problem Auquan was built to solve. Our AI agents eliminate the manual, repetitive work that buries private credit teams, from deal screening and credit memos to portfolio monitoring and LP reporting.

If the LP demands described above sound like the challenges your firm is navigating, we should talk. Learn more about Auquan's Credit Agent →