Executive Summary
European private debt fundraising rebounded in 2025 as allocators diversified away from the US, while evergreen vehicles intensified deployment pressure. Direct lending volumes stayed within historical norms with refinancings and dividend recaps comprising a large share; gross yields of 9–10% and a premium to public credit support allocator interest. Credit risk remains contained with defaults below historical averages.
Market Signals
| Entity | Signal | Date | Confidence ↓ | Ref |
|---|---|---|---|---|
| European private debt market | Fundraising rebounded in 2025 vs weaker 2024 | 2025 | high | |
| US private debt market | Fundraising weakened in 2025 | 2025 | high | |
| Evergreen / BDC channel | Strong fundraising; deployment pressure on lenders | 2025 | high | |
| Direct lending volume | Within norms; LBO constrained by slow M&A / PE exits | 2025 | high | |
| StepStone Group | ELTIF approval for European private debt product | 2025-02 | high |
Fund & Product Activity
Evergreen funds and BDCs continued strong fundraising, broadening the investor base beyond traditional institutions and reinforcing deployment pressure [^4]. StepStone received regulatory approval to launch a private debt ELTIF for European investors in February 2025, targeting Italy, Spain, Germany, France, and Nordic/Benelux markets [^10].
Credit Risk Watch
Borrower fundamentals improved incrementally; defaults rose from 2022 troughs but remain below historical averages [^8]. Returns softened modestly versus 2024 driven by lower base rates and tighter spreads rather than credit losses; gross yields remain 9–10% [^7].
Key Findings
High confidence
- Private debt fundraising remained healthy in 2025 and total capital raised is likely to reach 2024 levels.
- European fundraising rebounded after a weaker 2024, as investors looked to diversify from the US.
- Fundraising in the US weakened in 2025 while European private debt fundraising rebounded.
- Evergreen funds including BDCs experienced strong fundraising, intensifying deployment pressure in direct lending.
- Direct lending volumes remained within historical norms, but slower M&A and weak PE exits constrained LBO activity.
- Refinancings, add-ons and dividend recaps continued to represent a substantial share of direct lending volume.
- Gross yields on direct lending remain between 9–10% and above long-term averages.
- Defaults rose from 2022 trough levels but remain constrained and below historical averages.
- Direct lending continues to offer a meaningful premium versus leveraged loans and high yield.
- StepStone received approval to launch a Private Debt-based European Long-Term Investment Fund (ELTIF) in February 2025.
Coverage
StepStone published market research (2H25 direct lending trends) and corporate news (ELTIF launch). Topics: fundraising, volume mix, yields, credit risk, relative value.
Gaps
Deal-level terms, fund-level performance, and paywalled databases (PitchBook, LCD) not covered. H1 2026 granular European volume data may not yet be public.
Sources
- [1] [2] [3] [4] [5] [6] [7] [8] [9]
9 facts from this source
“Private debt fundraising remained healthy in 2025 and total capital raised is likely to reach 2024 levels.”
- [10]
1 fact from this source
“StepStone Group Inc. announced it received approval to launch a Private Debt-based European Long-Term Investment Fund (ELTIF).”