Time to choose private credit selectivity over retreat The central test for private credit in 2027 is simple: can managers protect capital when borrowers come under pressure and investors seek liquidity? Recent redemptions in semi-liquid funds, elevated payment-in-kind interest and closer scrutiny of valuations point to widening differences between managers. This environment argues for selectivity, not retreat: Preqin reports that 27% of investors intend to commit less over the next year, yet almost 85% expect to maintain or increase their long-term allocations.9, 11, 12
We favour managers with proprietary or relationship- led sourcing, disciplined underwriting and transparent valuations. Those strengths should be visible in the portfolio through resilient cash interest coverage, credible free-cash-flow conversion, prudent leverage and limited reliance on payment in kind (PIK). PIK can provide temporary flexibility, but repeated use may defer stress rather than resolving it. Fund terms also matter as periodic dealing does not guarantee liquidity, and gates can delay exits. 11, 12, 17
Software deserves additional scrutiny because AI could reshape competitive advantages. Businesses with embedded workflows, proprietary data and strong customer retention may be better placed, while less differentiated applications may face lower barriers to entry and pricing pressure.
Credit secondaries and distressed strategies may benefit from market pressure, but only where discounts, documentation and workout capabilities justify the risk.12, 13
Power and AI bring infrastructure opportunities
Private infrastructure is evolving from a predominantly income-oriented allocation into the physical backbone of a more digital and electrified economy. AI adoption, broader electrification and energy-security needs are increasing demand for reliable electricity and connectivity. The opportunity extends beyond data centres to power generation, utilities, grids, storage, power management, fibre and interconnection capacity. The International Energy Agency projects that global data centre electricity use will roughly double from 485 terawatt hours (TWh) in 2025 to 950 TWh in 2030, while J.P. Morgan highlights utilities and power assets as beneficiaries of rising demand.14, 17