Industry insiders predict widespread consolidation among private debt management sectors within the next five years.

The private debt market is currently experiencing a period of consolidation, with major players merging and expanding their operations. According to a new report by Carne Group, this consolidation trend is expected to continue over the next five years, with 72% of managers anticipating significant consolidation.

Des Fullam, Chief Regulatory and Client Solutions Officer at Carne Group, stated that consolidation is already in swing. Recent examples include BlackRock's acquisition of ElmTree Funds and HPS Investment Partners, as well as Franklin Templeton's expansion into the European market. Blackstone and KKR have also announced a collaboration in recent months, indicating an industry-wide consolidation in private credit management over the coming years.

The talent pool for private debt managers is thinning, contributing to the strategic necessity of outsourcing. According to the 2025 Boutique Asset Management Survey from Universal Investment Group, half of the respondents plan to outsource at least one business function within the next 12-24 months, mainly due to mounting regulatory pressures. Many managers plan to outsource at least one business function, the survey found.

The intensification of regulation is a significant factor driving private debt managers to outsource distribution and business functions. The majority of private debt managers (72%) cited regulatory pressures as driving them to outsource distribution. As regulation intensifies and talent thins, outsourcing has become a strategic necessity for many private debt managers.

This week, Rithm Capital announced it is buying Crestline Management, while Orix USA recently agreed to acquire a majority stake in Hilco Global. Apera and MV Credit are recent acquisitions in the private credit market. These acquisitions underscore the trend towards consolidation in the industry.

The expansion of private assets to retail and high net worth investors has made private debt mainstream, which may also contribute to the operational challenges faced by managers. As the industry grows, managers are still playing catch-up operationally, which is another factor contributing to the consolidation in the industry.

The Universal Investment Group's 2025 Boutique Asset Management Survey supports the findings of Carne Group's report, indicating a trend towards outsourcing in the private debt industry. The survey found that 52% of respondents plan to outsource at least one business function.

In conclusion, the private debt industry is bracing for a wave of consolidation as regulatory demands increase and talent becomes scarce. Outsourcing has become a strategic necessity for many private debt managers as they navigate the complex regulatory landscape and adapt to the changing industry dynamics.