What Share of Your Portfolio Should Sit in Private Debt?
Private credit is no longer an alternative reserved for institutions. As of 2026, the market has steadily increased to more than $2 trillion in assets under management (AUM) globally, which are expected to reach $3.4 trillion by 2030, according to PwC findings. Europe alone accounts for around $400 billion of the market — approximately one-fifth of global private credit assets.
The expansion has been driven by growing demand from both investors and borrowers. As banks tighten lending standards, private lenders are increasingly stepping in to finance businesses that struggle to access traditional credit. The ECB’s latest Survey on the Access to Finance of Enterprises (SAFE) found that a net 42% of euro area companies reported higher bank loan interest rates in the second quarter of 2026, up from 26% in the previous quarter. Among SMEs, the figure rose from 24% to 43%, while the SME financing gap indicator widened from a net 3% to 5%.
The question is no longer whether private credit deserves a place in a portfolio, but how much of a portfolio it should occupy.
Driven by institutions, adopted by retail investors
For years, private debt was the domain of pension funds, insurers, and family offices. These investors could commit capital in the long term, which is typical for inherently illiquid assets. Unlike publicly traded bonds, private loans are typically held until maturity, with limited opportunities to exit early.
As institutional demand grew, a new ecosystem emerged around specialist private credit managers. Rather than lending directly, institutions relied on these firms to source borrowers, conduct due diligence, structure loans, and monitor repayments. Over time, private credit evolved into a market where capital was increasingly channelled through dedicated asset managers rather than traditional banks.
The next and current stage of that evolution has been driven by fintech. Digital platforms have lowered the barriers to entry, making private credit accessible to individual investors. Peer-to-peer (p2p) lending platforms such as Maclear, for example, connect private investors with SMEs seeking financing. Instead of sourcing and assessing borrowers themselves, investors rely on the platform to perform due diligence, verify borrower eligibility, structure the loans, and administer repayments, significantly simplifying access to the asset class.
For retail investors, this opens access to a segment of the fixed-income market that was previously difficult to reach. Many investments have relatively short maturities — typically between 12 and 18 months. In return for accepting lower liquidity, investors can often earn yields that exceed those available on bank deposits while supporting the real economy, not speculation.
From a portfolio construction perspective, private debt belongs within the fixed-income allocation rather than alongside equities. It complements government and corporate bonds by adding exposure to private lending, diversifying the portfolio’s income sources without changing the role of the equity allocation.
How much to allocate in private debt?
Professional investors are continuing to increase their exposure to private credit. According to PwC’s Global Private Credit Survey 2026, 84% of experienced private credit investors expect to increase their allocations over the next 12 months. Among them, 56% plan to increase their exposure by up to 20%. For most retail investors, however, a more conservative allocation of 5–15% is generally sufficient to capture the diversification and income benefits without adopting high liquidity risks.
Three factors should determine the size of the allocation:
Investment horizon. Start with your investment strategy. Decide what role private debt will play in your portfolio and how long you intend to keep capital allocated to the asset class. If your strategy is to generate stable income over several years, a larger allocation may be appropriate. If you expect to change your portfolio frequently or invest towards short-term goals, keep the allocation smaller.Liquidity needs. Even long-term investors need access to cash. Emergency savings, planned major purchases, and other short-term financial commitments should remain in liquid assets. Private debt should be funded only with capital that you are confident will not be needed unexpectedly before the loans mature. The less predictable your future cash needs, the smaller your allocation should be.Existing exposure to the SME economy. If your income already depends on SMEs — for example, you are self-employed or work in a small family company — you are already exposed to SME risks. In that case, it’s best to reduce allocation to diversify risks.
In practice, investors with similar return objectives may arrive at very different allocations because their financial circumstances are different. For example, a 30-year-old salaried employee with stable income, a long-term investment strategy, and a well-funded emergency reserve may allocate 10–15% of a portfolio to private debt. With predictable cash flow and no immediate need for the capital, committing a larger share to less liquid investments is often appropriate.
By contrast, a 50-year-old homeowner with an outstanding mortgage, children approaching university, and several medium-term financial commitments may prefer a more conservative 5–10% allocation. As significant expenses draw closer, preserving liquidity becomes a higher priority, making a smaller allocation to private debt the more prudent choice.
Build the allocation over time
Unlike publicly traded stocks or bonds, private debt cannot be rebalanced with a few clicks. That makes allocation decisions more important before you add them to a portfolio. A practical way to manage this is through maturity laddering. Instead of committing all capital to a single investment, spread it across loans or funds with different maturities. As each investment matures, reassess your portfolio and either reinvest the proceeds or redirect them elsewhere, depending on your financial goals and market conditions.
This approach provides regular opportunities to rebalance without selling investments before maturity. It also helps manage liquidity, reduces concentration in a single vintage and allows the portfolio to adapt gradually as your investment strategy evolves. In private debt, successful portfolio management is less about frequent trading and more about planning when your capital comes back.
What Share of Your Portfolio Should Sit in Private Debt? was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.