Private credit not in a bubble: Hamilton Lane 2026 market overview

[SINGAPORE] Private credit is not in a bubble, said alternative asset manager Hamilton Lane in its 2026 Market Overview.

The private-credit market has grown from US$792 billion between 2005 and 2014 to US$2.4 trillion between 2015 and 2024. It comprises almost 50 per cent of the leveraged buyout financing market.

However, the long-term leverage multiple for private credit was slightly more than five times in 2025, from slightly under five times in 2024.

Hamilton Lane noted that recent fraud cases in the news had banks, rather than private-credit players, as the main lenders.

Artificial intelligence exposure, however, is a credit issue to watch out for, as there could be some fallout if the large language model (LLM) path fails to adequately scale or sees reduced demand.

AI is now the most important determinant of returns and investment activity, noted Hamilton Lane. Private markets cover a broader range of the AI ecosystem compared with public markets, which are highly leveraged on LLMs.

Venture capital in particular provides broader exposure, investing in applications of LLM models, making end-products work, fit together and be used more easily.

Coupled with private companies staying private longer, any upside with AI would be substantially reduced when it gets to the public market. This means the upside is highly concentrated in private markets.

Returns lag

Private markets logged the second-highest year for aggregate distributions in 2025, but the rate of distribution activity in private equity and real assets remained subdued. Only private credit has seen returns above the average of 21 per cent.

Now, private markets take an average of 5.7 years to liquidate net asset value (NAV), but these levels are elevated beyond the average for infrastructure and real estate. Real estate has crossed into the double-digit years to liquidate.

Distributions are unlikely to increase as capital markets are not in an environment where companies are sold in large quantities.

The 2020 to 2022 vintages will be a disappointment, as buyers overpaid at a market peak. The companies in these vintages will require more time to achieve the usual target of 1.5 to two times multiple, leading to slower exits and a lower internal rate of return.

The secondaries market is also seeing a spike, according to Hamilton Lane, with underlying dynamics and tailwinds. Secondaries remain robust, supported by a relatively slow exit environment, investors’ desire to rebalance and encouraging performance of general partners-led secondary deals.

Supply continues to outpace demand and create an attractive entry price, offering investors flexibility for their portfolios and faster deployment. Currently, secondaries make up only about 2 per cent of NAV, with room to grow.

Kerrine Koh, head of South-east Asia at Hamilton Lane, said: “Private-markets investments continue to be well-positioned to deliver the diversification and long-term returns investors seek, particularly at a time when global portfolios are being reassessed in response to ongoing macro shifts.

“We are seeing growing appetite from wealth investors across Asia to tap into this opportunity and expect that momentum to continue into 2026.”