As private credit markets continue to grow, questions around underwriting standards, risk management, and portfolio resilience have moved to the forefront. At SuperReturn Private Credit Europe, Tom Maughan, Partner, Bain Capital, and Patrick Ottersbach, Head of European Direct Lending Investment Team, Macquarie Asset Management, shared how experienced platforms are managing risk today, through selectivity, structure, and a relentless focus on capital preservation.
The discipline isn’t gone, it’s moved earlier
Tom is clear: “Underwriting standards in private credit remain pretty healthy… in part because we can always say no to deals.” At Bain Capital, that discipline starts before the deal arrives.
• A firmwide macroeconomic team briefs investment teams monthly on GDP, inflation, and market trends (including how AI is impacting software).
• Investors across venture, private equity, and credit are industry specialists, healthcare, software, and consumer, creating a shared knowledge fabric.
• Insights are benchmarked against liquid credit markets (with 20–100+ issuers per sector) to ground private deals in live comps.
Industry first, then structure
For Tom, industry selection is the first filter — then structure follows.
• Focus area: companies with EBITDA of €10–75m.
• Covenants and normal protections are still present.
• Most financed businesses are free cash flow positive.
• Pricing has trended down, but the balance between covenants, pricing, and structure remains.
“We still see a healthy balance in covenants, pricing, and industry selection.”
What the portfolios look like now
• Legal maturities around seven years.
• Hold periods have lengthened to ~4–5 years (vs. 2–3 historically), leading to more mature portfolios and often lower leverage.
• Some deals were done at wider spreads and better documentation, improving risk‑return.
• As maturities approach, extensions (1–2 years) are a governance moment to tighten terms if needed, or modernise where performance merits.
"Extension is a moment to improve documentation and structure, good or bad.”
Why credit alpha comes from avoiding losses
Patrick reinforces that credit investing is less about upside capture and more about downside control. At Macquarie:
• GP capital is invested alongside LPs in transactions
• Alignment matters most when markets turn
• Capital preservation is prioritised above deployment speed
“In credit, most of the alpha comes from avoiding losses.”
Software, cycles, and perspective
Despite concern around software buyouts, Patrick argued that software has always been dynamic, from mainframe to SaaS to AI. Today’s deals still benefit from substantial equity cushions and careful selection of durable, often regulated, business models. Cycles are inevitable. Discipline determines outcomes.
What this means for LPs
Healthy underwriting still exists, but it is less forgiving and more selective. The managers best positioned for the years ahead are those willing to slow down, walk away, and protect capital first. Bottom line: Healthy underwriting in 2026 is macro‑informed, specialist‑led, and structure‑first, with the judgment to pass.
