Composite: Depositphotos.com, REFIRE
The private debt market in Europe has reached a milestone of sorts. BF.capital GmbH, the asset management arm of Stuttgart-based financial adviser BF.direkt, has launched the BF.Private Debt Market Compass — a dedicated sentiment index tracking conditions across corporate direct lending, real estate debt, and infrastructure debt. The fact that such an index now exists at all is itself a signal: private debt has grown into a market substantial and sophisticated enough to warrant its own barometer.
The debut reading, based on a survey of 67 fund managers conducted in December 2025, came in at 60.1 points — comfortably above the neutral mark of 50. The expectation gap, measuring the difference between sentiment about the past six months and the outlook for the next six, is also positive, pointing to increasing optimism heading into the first half of 2026. For a market that has navigated rising interest rates, a sluggish transaction environment, and persistent macroeconomic uncertainty, that is a meaningful result.
Capital flowing, stress contained
The most striking findings relate to fundraising. More than two-thirds of participants report increasing momentum in capital raising, with 82% expecting further improvement over the coming six months. Not a single respondent anticipates a decline in LP commitments — a unanimity that is notable given the pressures the market has absorbed. Existing investors are doing much of the heavy lifting: in several segments, re-ups account for more than 80% of new capital, pointing to a market where trust has been earned rather than one dependent on a constant flow of new money.
Financing conditions have been broadly stable, with a slight tilt in favour of borrowers. Leverage levels remain conservative: debt ratios in corporate direct lending are mostly below five times EBITDA, while loan-to-value ratios in real estate debt sit within the 56% to 65% range. A modest shift towards lenders is expected over the next six months — a gentle correction rather than any dramatic tightening.
On stress, the compass is candid but not alarming. Respondents are clear that difficulties in their portfolios are primarily operational and sector-specific rather than the product of excessive leverage — a distinction that speaks well of underwriting discipline. In real estate debt, office and high street retail continue to face structural headwinds. Consumer-related industries and retail are under pressure in corporate financing, while the energy sector is flagged in infrastructure. Non-performing loan ratios have held largely steady, with 85% of respondents reporting unchanged figures. The tone is one of alert, managed caution rather than incipient crisis.
Banks retreat, private debt advances
The structural backdrop explains why capital keeps flowing into the asset class. According to a study by Empira, commercial real estate loans worth around €130 billion matured across European markets in 2025 — rising to €185 billion in 2026. Many were originated during the low interest rate era and now face significantly higher refinancing costs. At the same time, Basel III and IV are tightening bank capital requirements, making it harder for traditional lenders to fill the gap. The space they leave is precisely where private debt steps in.
The longer-term numbers tell the story clearly. Alternative financing loans globally stood at around $5 billion in 2014; by 2023 that figure had risen to more than $8.2 billion (global figures, hence dollars) — a 62% increase over the decade. The mid-market segment, covering financings between €30 million and €75 million, is seen as particularly fertile ground, offering deal flow too large for regional banks and too small for the biggest institutional lenders.
BF.Capital's new compass arrives at a moment when private debt is no longer a niche alternative but an established part of the capital stack. The 60.1 debut score, the positive expectation gap, and the unanimity around rising LP commitments all point to a market in good health. For investors navigating an environment where bank capital is scarcer and refinancing pressures are intensifying, a regular, structured read on where the private debt market stands is a genuinely useful addition. REFIRE will be watching its subsequent editions with interest.
The BF.Private Debt Market Compass is published by BF.capital GmbH. The Empira study referenced is titled "Private Debt as an Alternative Solution for Real Estate Financing."