US private credit, particularly in the middle market, continues to demonstrate resilience and appeal for Australian investors, even as competition intensifies, according to Nuveen.
“Global private credit – whether corporate or asset-backed – remains an attractive opportunity set for those seeking diversified sources of stable income in an uncertain environment … In this climate, separating rhetoric from reality is crucial,” the firm’s H1 2026 Alternative Credit Insights report said.
The global investment manager says deal flow remains strong, driven by ongoing private equity activity and refinancing needs, with borrowers in good health and sponsors prioritising liquidity management, ensuring demand for diverse and flexible financing options.
Andrew Kleinig, managing director and head of Australia, said US direct lending offers compelling risk-adjusted returns that compare favorably with public credit investments and diversification versus other areas of private credit.
“The deeper US middle market and established providers deliver opportunities and defensiveness attracting increasing global allocations. It is important to note that the absence of mark-to-market pricing can obscure volatility and credit deterioration until realization.”
He added that while this creates smoother reported returns, valuation opacity may mask portfolio stress and appraisal-based valuations can lag economic reality.
“These considerations should be weighed against direct lending’s structural protections and yield advantages,” Kleinig said.
At the same time, Nuveen says growing activity in the secondary market is providing investors with increased flexibility, highlighting the sector’s ability to adapt and deliver strong performance in shifting market conditions.
Kleinig said competitive dynamics have intensified as more capital enters the sector. However, the advantage still lies with experienced, well-established lenders capable of sourcing proprietary deals, maintaining disciplined underwriting, and managing risks.
“For experienced lenders, this competitive environment has not led to a material deterioration in terms, with leverage and covenants in new deals remaining within prudent ranges,” he said.
This combination of robust credit fundamentals and targeted expertise allows investors to access opportunities across diverse sectors, Nuveen says, from healthcare technology to consumer services, while maintaining protection against downside risks.
Direct lending continues to offer compelling risk-adjusted returns compared with public credit markets, attracting growing allocations from global investors seeking both yield and diversification. While traditional mark-to-market reporting can mask short-term volatility, the structural protections and long-term nature of private credit provide a buffer against market swings.
Meanwhile, secondary market activity is slowly increasing, giving investors greater flexibility to manage exposures or exit positions early, particularly through larger, established lending platforms.
Looking ahead, US middle-market direct lending is poised to remain a key component of investor portfolios. Managers with scale, proprietary deal access, and deep market insight are well positioned to continue delivering resilient performance, even as market dynamics evolve. For investors seeking a combination of yield, capital preservation, and diversification, the sector offers a compelling proposition in today’s competitive lending environment.
The US remains a rich source of opportunity despite new risks, according to Nuveen, and US-based credit continues to play an increasingly important role in portfolio diversification, with investors drawn by its strong fundamentals, attractive risk-adjusted yields, and proven resilience.
“Credit spreads have tightened across public and private markets, and valuations reflect a healthy outlook for steady growth and low defaults. The influx of new capital has sparked concerns around manager performance, triggered by a rush to scale, which could expose investors to risk should underwriting standards decline. As this market continues to mature, the difference between experienced credit managers and those new to the space is more pronounced than ever.”
Nuveen said alternative credit in 2026 is about building portfolios that blend US scale and resilience with global diversification, reaching across borders and asset classes to capture income, risk mitigation, and long-term value creation.
“The US remains at the core of global alternative credit strategies, but just as importantly, looking beyond the US has never been more timely.”
While the US remains “undeniably attractive” for global investors, Nuveen says the universe for alternative credit is broader than one market and notes Europe offers unique risk diversification exposure.
According to Mercer’s recent Private Market in Motion: private debt taking the pulse of global asset managers survey, 37 per cent of respondents identified European direct lending as having the most growth potential over the next five years.
“Opportunities in Europe reflect the continent’s geopolitics. A continued focus on energy infrastructure for both renewable energy and energy security, for example, demonstrates how structural changes are driving compelling investments,” the report said. “These same factors are acting as catalysts for investment grade private credit, while real estate debt is tapping into this protectionist dynamic, one that will continue to create entry points across logistics,” the report said.
