Private Debt Investor: Credit is no longer about exposure – it’s about selection

This has created an abundance of competitors in the space, but with it challenges for newcomers. Robin Doumar, founder and managing partner at Park Square Capital – which won Private Debt Investor’s award for Junior Lender of the Year in Europe¹ – sees this as an exciting time for the industry but warns of the need to stay disciplined, focus on the fundamentals, and to remember that, in an environment with billions of capital flooding in, size isn’t everything.

Going into 2026, what is the state of the private debt market?

We believe private debt continues to be an asset class that is very attractive to investors, particularly in a world where Treasuries are volatile and equities appear fully valued. We continue to see strong interest from investors, which means it’s become increasingly competitive out there. Over the past year or so, that’s created a compression in spreads, and the need for selectivity has never been higher.

As such, the state of the market reinforces how important it is to be an ‘asset-picker’. This environment is very much a ‘buyer beware’ market; there is a lot of less-than-ideal quality in the market, and it can be more like buying used cars. This, combined with rapid and disruptive technological change, means investors have to be thoughtful and select opportunities very carefully.

The US remains the most established and deepest private debt market – what challenges does this high level of competition bring?

Throughout his career, Warren Buffett has talked a lot about the challenges of investing large pools of capital, and how it is easier to invest smaller sums. That is probably one of the biggest themes I see right now in the US market, a market in which the largest managers simply have too much capital for the opportunity set and face enormous pressure to deploy.

Size helps managers only up to a point. This sentiment could be best expressed as a sort of curve – you need to be large enough to be relevant, but beyond a certain point, the pressure to deploy can have an adverse effect on performance outcomes. This is particularly visible in the US – the Financial Times reported in September 2025 that BDCs grew to represent $450 billion of AUM in 2025.

With the challenge of deploying such enormous pools of capital, it is inevitable for ‘sewage’ to enter credit portfolios. This underscores the importance of credit discipline. While large, the credit market is not limitless in size, and there is a trade-off between quality and diversification. We believe diversification cannot save a bad credit picker. Credit investors need to remember that it is not about owning the market or even picking the winners, but about avoiding the losers.

Much is said about the US private debt market, but what opportunities are you seeing in Europe?

While the US market is opportunistically attractive, we continue to see Europe as structurally attractive because it’s less well served. Europe is more complicated to access, with lots of different nationalities. To be effective, there is a requirement to be present in a number of jurisdictions. The buyout opportunity set in Europe continues to be very good. There are a lot of carve-outs in the big industrial conglomerates there, with many family businesses open to a sale. A much greater degree of the continent’s economy is in private hands and the region’s capital markets are less well developed, which are other structural reasons why Europe continues to be an attractive place to do business.

How important is it to seek alignment when securing partnerships in this sector?

We have some long-standing partnerships, and one of our longest is with SMBC. That’s been an excellent banking partnership because they bring some great people and origination capability to the table. And as a bank, they can do certain things that funds find much harder to do, like super senior facilities. Elsewhere, we’ve formed a strategic alliance with Nomura, which has strengthened our origination and underwriting capabilities in the US senior direct lending market.

Like any relationship, partnerships require a lot of work, and the devil is in the detail. It’s easy to announce a partnership, but the hard work starts afterwards. In the market, we’ve seen a lot of new partnerships announced, and you can’t help but wonder how many will stand the test of time.

Looking ahead, what do you see as the biggest opportunities in the private debt market?

Direct lending continues to be very interesting as a core exposure that investors should have. Over the past decade or so, we’ve seen it really develop as a standalone asset class, providing a very basic level of exposure that investors can get accustomed to. Using direct lending as a base camp, if you will, investors can then expand into more interesting things in the credit space as they get comfortable.

And, conversely, what risks do you foresee in the private debt market?

There’s been a lot of press around bad deals that have occurred, and none of that is particularly surprising to those of us who’ve been in the industry for a long time. A lot of newcomers who assumed they couldn’t lose their money investing in senior secured debt are set for a rude awakening. Investors should be asking themselves: ‘Who’s investing my money?’, ‘what are their incentives?’ and ‘is this all they’re focused on?’

In terms of stress in the market, the private credit market has yet to go through a full cycle. As such, there are some vehicles – open end, evergreen vehicles, where retail investors can redeem – that will structurally change the market. When the redemptions really hit in earnest, in a period of true underperformance, which we haven’t really seen yet, that will be interesting.

History has taught us a lot of lessons about making investments. One of the most important is that the quality of an investment and the structure of the capital holding it are equally critical. In practice, outcomes are often driven as much by whether a fund is structured to hold assets through market volatility as by whether the underlying opportunity
is good or bad.

We’ve seen countless situations where people have made what would have been good long-term investments had they been structured to withstand market volatility. That’s why it will be interesting to see what happens when all the retail money in BDCs starts to reverse. That will be the real test and will pose some interesting opportunities for investors with long-term capital.

Originally featured in Private Debt Investors Report

1. <sup>PDI: 2025 Junior Lender of the Year, Europe Awarded by Private Debt Investor (PDI), a publication addressing private credit markets, on 2 March 2026. The award covers the 2025 calendar year. PDI determines its awards annually via editorial shortlists and an online reader poll of industry participants, and results are announced in PDI’s Annual Review; the process is inherently subjective. The selection may have been based on a limited universe of participants, and there can be no assurance that a different sampling of participants might not have achieved different results.
   
   The award (s) may not be representative of any one client’s experience with Park Square Capital and should not be viewed as indicative of future performance. Park Square Capital has not provided compensation to Preqin, Private Debt Investor or Debtwire for the ability to communicate the results of the below awards</sup>. ↩︎