How the future of private debt will be shaped by technology

• Private credit markets are increasingly competitive, making use of technology a meaningful source of efficiencies in fundraising, underwriting and operating for private debt investments

• Stricter banking regulation foreseen under the final stage of Basel III regulations would create new opportunities for private debt, which is one of the fastest growing asset classes in alternatives.  

• The largest fund managers are raising most capital, meaning competition is on for smaller and emerging managers to speed up their processes and be able compete effectively.  

State of private debt in 2025

Private debt assets under management (AUM) are forecast to have hit $1.6tn by the end of 2024. Direct lending was the most popular strategy, taking almost half of private debt AUM, according to Preqin. Direct lending also secured almost three quarters ($152.7bn) of total capital raised for private credit in 2024, followed by special situations, which raised $24.8bn.

Direct lending’s overall AUM, as well as its proportion of private debt AUM, has been rising steadily since the early 2000s, and was compounded by stricter banking regulations after the global financial crisis of 2008.

Of the 20 largest private debt funds closed in 2024, 18 were direct lending funds. The largest was Ares’ Senior Direct Lending Fund III, which closed at $34bn with $15.3bn of commitments. This year, Ares has already closed €17.1bn worth of commitments to its sixth European direct lending fund.

‍BlackRock set up a direct lending arm at the end of last year, while its CEO Larry Fink labelled private credit as a ‘primary growth’ driver. The company expects the private debt market to roughly double by 2028 to $3.5tn.  And new highs could yet be reached.  

‍Basel III endgame ‍

Although not finalised, the Basel III endgame is in sight, and private markets companies could be among the main winners. ‍

The global Basel Committee for Banking Supervision’s extensive reforms are designed to improve bank stability after the global financial crisis of 2008, particularly in the calculation of risk-weighted assets. If banks were forced to adopt more stringent capital requirements, borrowers are likely to look at private debt as an alternative source of credit.

However, uncertainty remains. The reforms have faced opposition in the U.S. and could be scrapped there under Donald Trump’s presidency. As a result, the Bank of England recently announced it would delay implementation by a year to see how the situation plays out, and the European Union will also weigh up its options.   ‍

Increased complexity and competition

Nevertheless, the private credit market has grown in complexity and sophistication since implementation of the Basel III regulations began in 2012, and as the opportunities in the asset class increase, differentiation has become crucial. Artificial intelligence and machine learning techniques can support efficient portfolio monitoring across a large number of assets, and technology is widely expected to become a way for firms to make faster, more accurate decisions under time pressure.

At the same time, the market is consolidating. Just five funds accounted for two-thirds of all fundraising in direct lending last year, and over 40% of total private debt fundraising. The rise of mega funds in the asset class has been observed for a few years, and in 2024 investors seemed resolute to commit to more established fund managers.  

‍How Robin AI can help ‍

Robin AI can help by automating time-consuming tasks and provide visibility over important time-based obligations like regulatory reporting or audit requirements. Our Reports tool allows the creation of due diligence reports in minutes, with AI able to sift through thousands of opportunities.

Legal professionals and non-lawyers alike can build a list of issues they’re interested in for their contracts and can receive an accurate summary of each issue for each contract, in plain language reports complete with clickable citations, which allow for humans to easily verify the summary. ‍

Read more about how AI can support speed and accuracy, and enable deeper due diligence and faster screening of opportunities in Robin AI’s latest report on AI in private markets.