that it poses, the return characteristics, the role that it can play in investors’ asset allocations.

➡️ Unfortunately, these opinions are often stated as if they were hard, observable facts. Worse still, they often contradict each other. So I think it is worth asking ourselves: What do we actually know?

➡️ One way of answering this question is by looking at the rapidly expanding academic literature on the topic. Fortunately, Prof. Victoria Ivashina of Harvard Business School has done this for us. In the working paper (a link to which I will include in the comments), she gives an expert overview of the relevant research on private debt. The paper is surprisingly accessible and well worth a read for anyone investing or interested in the space.

Some points I found interesting:

👉 In addition to the familiar story of bank consolidation and post-GFC bank retrenchment, the paper makes a compelling case for demand-side forces driving the growth of private credit. The strong growth of private equity and the role of private credit in financing companies that fall outside of the scope of the traditional banking model both feature, for example.

👉 I also appreciate the nuance in the analysis presented. For example highlighting the different historical periods of how PE transactions are financed—Post-Covid-19 is shown as a distinct period characterized by private credit aggressively starting to compete against the leveraged loan market.

👉 And does academic research say that private debt is an attractive asset class for investors? It appears that the jury is still out. The literature highlights the difficulties in assessing the performance of private credit funds fairly and does not appear to offer a strong verdict in either direction. One study cited finds a substantial alpha when treated as debt, but an alpha of zero when equity exposure is accounted for.

➡️ Prof. Ivashina's paper provides a valuable overview of the literature as it stands and covers much more than I have mentioned here in my short post.
I believe we are still in the early stages of academic research on private debt as an asset class—It will be interesting to see what we learn in the next few years as the asset class becomes even more mainstream.

Disclaimer: Not financial advice, all mistakes are my own.

👉 Turns out, it does, sort of… Whether fund managers who outperform once are more likely to do so again is an important question for fund selection.

👉 In the early days of scholarly research on the topic, evidence suggested that they do. However, for vintages post 2000, there is little evidence of performance persistence in PE.

👉 Historically, research on the topic has focused on performance relative to peers as measured by PME or IRR. But in an interesting new paper, published just a few days ago in The Journal of Finance, the authors find that while relative returns decline with scale, NPV—a measure that captures both scale and returns—persists and even increases.

👉 This research suggests that GPs with good performance are able to raise larger funds and do bigger deals. This erodes outperformance as measured with traditional metrics, but allows for a persistence NPV. It also, of course, generates higher fees for the GP.

👉 Another interesting finding in this paper is that this NPV persistence is not only observable at the level of the GP but also at the level of the individual investment professional, with the career benefits one would expect.

👉 To me, this paper provides solid academic evidence for something many investors will have already suspected. It also points rather directly to an interesting question:

▶️ would you rather a GP raises larger funds and does larger deals, eroding gross IRR/ PME outperformance,

▶️ or would you prefer a hard cap at a smaller fund size but with a higher fee structure, eroding net return KPIs but allowing headline returns to persist?

👉 There is much more to this paper and for those inclined, I would suggest taking the time to read it. It is also available for free on an open-access basis: Size, Returns, and Value: Do Private Equity Firms Allocate Capital According to Manager Skill?

Happy to share the link for anyone interested.

Note: All errors are my own

A few things stand out to me here:

1️⃣ Firstly, it highlights how small private markets still are in comparison to the wider investment industry.

➡️ In my view, it's pretty much impossible to say how big private markets could get.

➡️For private equity and private credit any corporate could theoretically become a relevant target at the right price: From small entrepreneur-run businesses selling into roll-up platforms to listed giants being taken private, the potential universe is practically uncapped.

This is limited in practice, but a larger and more diverse private equity industry could unlock parts of the universe.

➡️And notionally the infrastructure market could include all roads, ports, airports, hospitals and energy assets.

2️⃣ Private markets make up c. USD 330 billion of Blackrock’s AuM, representing c. 2% of the total USD 15.3 trillion.

➡️ Despite this, private markets constitute 11% of the Blackrock’s base fee and securities lending revenue.

➡️ No surprises here, but it does underline why despite recent noise in the BDC space, large asset managers are keen to push further into the private markets.

Data from: Blackrock Q2 2026 earnings release, Preqin as at December 2025 (extracted July 2026); all errors are my own.

The narrative that the period of ultra-low interest rates made life easy for private equity managers is both popular and intuitive:

▶️ Previously, the argument goes, PE managers had to rely more heavily on operational improvement, growth initiatives and cost discipline. In the era of ultra-low interest rates, they could simply lever up on cheap debt to generate attractive returns instead.

▶️In the paper, Paul M. Guest (King’s College London) and co-authors use a sample of 1072 UK buyouts completed in the 2005-2019 period to test empirically whether this narrative holds (the combination of an active PE market and mandatory financial disclosures make the UK a good test environment).

The results are certainly interesting:

✅ A lower aggregate cost of capital significantly increases portfolio company leverage, driven by cheaper debt.

❌ However, the authors find no effect on operating returns, margins, growth, or productivity.

From a practitioner perspective, this seems relevant to me for a few reasons:

1️⃣ It is reassuring as it suggests that the operational skillsets that LPs want to see do not have to be re-learned, they were still actively in use even in the very benign market conditions of the lower interest rate era.

2️⃣ The idea of a post-cheap-money “hangover” may be more nuanced than some suggests. Around one third of the sample had not yet been exited as at the time of the analysis, so the final verdict is still open, but if low-rate-era deals were still accompanied by operational improvements, rather than relying solely on cheaper financing, this may provide at least some resilience when rates rise.

Much more information and many more useful insights in the paper itself; well worth a read for those academically inclined.

Note: All errors are my own; I am in no way associated with the paper.

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