Payment-in-kind is one of the most scrutinised features in private credit today – and one of the most misunderstood. The labels we reach for don’t always tell the full story.

The market has settled on a familiar shorthand for thinking about payment-in-kind (PIK). “Good PIK” is the PIK agreed at entry, a deliberately structured feature of the deal, priced and protected from day one. “Bad PIK” is the PIK that arrives later, typically through an amendment, when a borrower can no longer service cash interest and the lender agrees to capitalise it instead.

It is language you will hear across the industry, and as a first cut it holds up: PIK a lender chose to underwrite is generally healthier than PIK a lender was forced into. One mechanical distinction is worth drawing up front: structured PIK capitalises interest by design from day one, while a PIK toggle is an option to switch from cash to PIK on defined terms – and either form can be good or bad, so what follows applies to both.

But the shorthand misses something.

Anchoring the distinction on when the PIK was agreed assumes that origin determines outcome: that good beginnings produce good endings. They do not always, and that gap opens up a category the two-way split has no name for: PIK that was agreed at the onset, and so looks like good PIK, but was never really value-covered. Call it “Fake Good PIK”.

A PIK feature’s origin tells you how it started; it says nothing about whether the position stays covered, or whether value is slowly migrating from lender to borrower over the life of the hold. So, we are really assessing three PIKs, not two – good, bad, and fake good – and two positions can sit under the same “good” label yet end up in opposite places. Two scenarios a direct lender might face, and approach differently, show why.

Scenario one – the disciplined originator 

THE SETUP

A direct lender originates a transaction with a PIK toggle built in from the outset. Crucially, the feature comes with adequate protections: the toggle can only be exercised in defined circumstances, PIK usage is capped (to a % of margin, ie there is a minimum cash pay) and time-limited in the documentation, and, importantly, any PIK is charged at a premium to the cash margin. PIK is expensive by design, which keeps the borrower honest about when they use it.

The company performs strongly throughout the hold. Some way into the investment, management identifies an attractive bolt-on acquisition and comes to us with a plan: they intend to toggle to PIK for a predefined period, at the agreed premium, to preserve cash while they integrate the target and capture synergies. Then they expect to return to cash pay.

We are comfortable with this. Our position remains well value-covered, the PIK is limited in both size, scope and duration by the documentation we negotiated, and we are being paid a premium for the flexibility we are extending. This is a healthy business using a tool we deliberately built into the structure to fund growth on sensible terms, not a borrower in distress reaching for oxygen. In due course, the company delivers on the integration, switches back to fully cash pay, and the position resolves itself cleanly.

VERDICT

Good PIK – and it earns the label. Agreed at entry, tightly protected, priced at a premium, used briefly by a performing business, and fully value-covered throughout. The structure did exactly what it was designed to do.

Scenario two – the stretch that never grew into itself  

THE SETUP

A lender originates a deal that requires a PIK component from day one. The PIK is not funding a specific, time-boxed use of cash; the borrower simply wants to stretch leverage without generating the cash to service it today. The thesis rests on future growth: the company expects to grow into the capital structure, and the PIK is meant to bridge the gap until it does.

On the surface, this is “good PIK” by the standard definition – it was agreed at the onset, not bolted on later through an amendment. But the label flatters it. The growth never materialises. Rather than being a temporary feature that switches off once cash flow arrives, the PIK simply keeps running.

The balance compounds, quarter after quarter, and the PIK creeps up. And it makes little difference here whether the PIK was structured in from day one or a toggle the borrower had to trigger once the growth case slipped: the mechanism differs, but the outcome – a compounding balance that cash flow never catches up with – is the same.

The problem isn’t the mechanism itself, but what it conceals. Because cash is never generated, the lender’s return becomes increasingly back-ended: more and more of the expected value sits in a growing accrued balance that only gets realised at exit or refinancing, and only if the enterprise value is there to support it.

Every quarter of missed growth widens the gap between the notional return on paper and the cash the position has actually produced. A feature designed to bridge to growth has instead become a way of deferring the recognition that growth is not coming.

VERDICT

Bad PIK – despite ticking the “agreed at entry” box. It started clean. That didn’t save it: value has shifted into an accruing balance whose recovery depends on a growth story that never delivered.

Why the labels only get you so far

Set the two side by side.

Scenario one was agreed at entry and is genuinely positive. Scenario two was also agreed at entry, and is not.

The “good PIK / bad PIK” framing, anchored on when the PIK was agreed, misses the questions that actually matter: Is the position value-covered? Is the PIK time-limited and capped, or open-ended? Is it being paid at a premium that keeps the borrower disciplined? And is it funding a specific, self-liquidating need, or substituting for cash the business was always going to struggle to produce?

Categorising PIK is a helpful exercise, and we do it. But the labels are a starting point, not a substitute for judgement. The characteristics of each situation – coverage, protections, pricing, purpose and trajectory – are what determine whether PIK is working for the lender or against it.

At Hayfin, we address PIK usage carefully and try to get ahead of it where it matters most: at origination.

Underwriting discipline is key, we assess fundamental cashflow generation and look critically at the sustainability of capital structures taking into account potential PIK accretion. The right protections – caps, minimum cash pay, time limits, premium pricing and clearly defined toggle conditions – are far easier to secure when you are structuring a deal than to retrofit once a position is stressed. Done well, PIK is not something to be feared. It can be an effective tool to optimise performance in situations where our debt position is value-covered, allowing good businesses to fund growth without over-burdening cash flow.

So, good, bad, or fake good PIK?

As is so often the case in private credit, the honest answer is: it depends – on the structure you negotiated, the coverage you hold, and the discipline you bring to both. The label on the tin is the least interesting part.

Healthcare has never been more essential, or more capital-intensive. An ageing global population, rising chronic disease burden, and a continued wave of scientific innovation are driving demand for therapeutics, devices, and services to record levels, largely independent of the economic cycle. Yet the capital available to fund this growth has not kept pace, leaving a widening gap between what the sector needs and what traditional financing can supply.

The tailwinds for specialist healthcare credit are clear:

However, the capital required to fund this expansion is not:

External healthcare financing has been highly cyclical

This is precisely where Hayfin’s Healthcare Strategy is designed to operate — providing flexible capital across the debt and equity spectrum, including equity capital replacement, mezzanine financing, and growth debt, with the sector expertise to underwrite complexity across biopharma, medical devices, and medical technology.

For more information on Hayfin’s healthcare strategy, please visit: hayfin.com/strategies/private-credit/healthcare

Further Reading: Examining Healthcare: Regulation and related implications for opportunistic allocation

Hayfin today announces the successful close of Hayfin Direct Lending Fund V (“DLF V”), having attracted capital in excess of €15 billion, significantly exceeding its target for the fundraise. The fundraise comprises the commingled Hayfin Direct Lending Fund V, which has reached a final close, together with related investment vehicles. At the time of the close, DLF V had already deployed more than 50% of commitments across over 35 companies. 

Through its Direct Lending strategy, Hayfin sources, structures and invests in performing senior‑secured loans to primarily European middle‑market and upper‑middle‑market businesses, with an emphasis on downside protection and robust cash flow generation or asset coverage. The vast majority of these loans are originated through an extensive relationship-based primary sourcing network spanning 13 offices and dedicated sector‑specialist teams. This broad-based origination model has allowed Hayfin to build a diverse portfolio of loans to a wide range of cash‑generative businesses, with minimal exposure to software credits deemed most susceptible to AI disruption. Hayfin invested a record €7.1 billion into Direct Lending transactions in the last twelve months, bringing total strategy deployment to over €38 billion across more than 350 investments since the firm’s inception. 

The fundraise attracted capital commitments exclusively from a global institutional investor base, comprising public and private pension funds, financial institutions, insurance companies, sovereign wealth funds, funds of funds, endowments, consultants and family offices. Recent strains within semi-liquid US private credit funds for retail investors have accelerated LP demand for conservative fund structures, in line with Hayfin’s approach of securing locked-up capital in closed-ended drawdown and institutional evergreen vehicles. This helped Hayfin to achieve the most significant milestone yet for its flagship private credit strategy with the successful close of Direct Lending Fund V, more than doubling the amount raised for Direct Lending Fund IV, which closed in August 2023 with over €6bn in total commitments.  

The DLF V fundraise also includes the successful close of a rated note feeder which contributed approximately $600 million of total investable capital. The structure, advised on by Proskauer as Legal Counsel, provides insurers with capital-efficient access to Hayfin’s European Direct Lending strategy, reflecting the firm’s commitment to broadening access to its private credit platform across a diverse range of institutional investor types. 

Mark Tognolini, Co-Chief Executive Officer and Co‑Founder of Hayfin, commented: “We are very pleased with the successful close of Direct Lending Fund V and grateful for the strong support from both new and long‑standing investors. At a time when parts of the private credit market are experiencing heightened volatility, this fundraise reflects confidence in our disciplined underwriting, our highly specialised team, our conservative approach to fund structuring and our differentiated origination model, which has been built to perform consistently across market cycles. 

“In recent months, longstanding differences between the US and European private credit markets have become even more pronounced, with European lenders continuing to benefit from greater market fragmentation, continued bank retrenchment and a predominantly institutional capital base. Against this backdrop, we are well placed to take further market share and support high‑quality European businesses with flexible financing solutions – as we have consistently done in other periods of volatility – while preserving our focus on capital preservation and downside protection.” 

Hayfin was advised on the fundraise by Macfarlanes. 

Since it was founded in 2009, Hayfin has invested over €55bn of capital across more than 500 portfolio companies via its private credit strategies. 

Hayfin has fully underwritten the debt financing to support the acquisition of Hyve Group (“Hyve”), a leading next-generation B2B events business, by Hellman & Friedman (“H&F”). H&F is acquiring Hyve from Providence Equity Partners (“Providence”) and Searchlight Capital Partners (“Searchlight”), marking the next phase of Hyve’s growth and evolution.

The senior-secured facility extends an existing lending relationship with Hyve. Hayfin first invested in the business in 2021 and then again in 2023 when supporting its take-private by Providence and Searchlight. Since then, Hyve has delivered three consecutive years of double-digit organic revenue growth, expanded EBITDA beyond $100m and built out its platform through seven strategic acquisitions and five key event launches, while investing significantly in technology and tech-enabled products and services. In partnership with H&F, Hyve will focus on accelerating international launches, expanding adjacent products and services and continuing to scale into growing end markets via its proven acquisition strategy.

Founded in 1991 and headquartered in London, Hyve operates a global portfolio of premium, must-attend B2B events connecting some of the world’s leading companies, investors, innovators and decision-makers. It operates across high growth sectors such as healthcare, ecommerce, edtech, supply chain and martech, with flagship events including HLTH, Shoptalk, Bett, Mining Indaba and Fintech Meetup. Under its current leadership team, Hyve has positioned itself as a partner platform of choice for ecosystem events in high growth markets, with a customer offering spanning content, intelligence, matchmaking and membership.

Stuart Mitchell, Director at Hayfin said: “Having first invested in Hyve in 2021, including in its most recent ownership by Providence and Searchlight, Hayfin has developed a deep understanding of the business and its exceptional growth record. During this period, Hyve has transformed into a more global, diversified and digitally sophisticated platform, with strong momentum behind it. We look forward to working with Mark and his talented team as they enter this exciting next phase of the company’s development in partnership with H&F.”

Rehan Jiwani, Managing Director at Hayfin said: “We have been lenders in the B2B events space for more than 15 years and we have on-going strong conviction in the attractiveness of the sector. Hyve is an example of an exceptionally strong platform within B2B events, and we are excited to support the company with this latest, large-scale, financing. From a Hayfin perspective, it highlights our ability to provide sizeable financing solutions that support sponsors and management teams in executing their growth ambitions.”

Completion of the transaction is expected by the end of the calendar year.

When preparing to host Hayfin’s North American clients at our annual US AGM in New York last month, we knew three topics would be at the forefront of their thinking: software, retail redemptions and the Iran conflict. The discussion became a timely test of how private credit managers can demonstrate that they are the right partners to help investors navigate market volatility.

New AI models have triggered a repricing of business durability in the face of accelerating disruption, prompting LPs to examine their GPs’ exposure to potential losses in software, where private credit is often seen as heavily concentrated. At the same time, a surge in redemptions and gating in some US semi-liquid private credit vehicles has forced price discovery and raised the prospect of supply shocks. Finally, despite the fragile ceasefire reached in April, tensions in the Middle East continue to ripple through supply chains, commodities pricing and energy markets.

These three trends are playing out differently on either side of the Atlantic. In the case of the first two, the impact should in theory be more muted in Europe. Software is a smaller part of European lending than in the US, where it accounts for an estimated 20–25% of private credit activity. In Europe, higher-risk ARR lending to pre-profit software businesses with unclear paths to deleveraging is far less prevalent. Similarly, while retail capital has grown to 20–25% of global private credit AUM, withdrawals have been concentrated in US Business Development Company (BDC) and interval fund structures rather than in European vehicles, which are still relatively nascent.

But Europe is unquestionably more exposed to geopolitical risk – at least from the specific perspective of disruptions to energy supply and the resulting increase in inflation.

Is your money safe?

In all three cases, the first question that LPs should be asking their private credit managers is how they will preserve capital, protect value and limit downside risk within their existing portfolios.

We have previously explained why we remain underweight software across both our Private Credit and High-Yield & Syndicated Loans businesses. Our software exposure across Direct Lending portfolios is less than 6%, and below 5% in our latest vintage, which compares favourably with peers.

We have managed that exposure through prudent portfolio diversification and a clear view that software is not only potentially vulnerable to generative AI disruption, but also one of the most competitive parts of the market. Where we are invested, those loans are to large, mature, high-growth companies backed by sector specialist GPs. We have grounded our credit judgment in traditional credit metrics rather than uncertain enterprise value assumptions.

Uncertainty is not an environment we are waiting to pass. It is the environment we are built for.

We are similarly well placed on liquidity. Hayfin’s private credit strategies rely exclusively on fully locked-up institutional drawdown funds, with no retail capital. We had already been seeing growing demand for institutional vintage solutions that operate as drawdown vehicles, with redemptions achieved through natural portfolio run-off rather than forced asset sales. That trend now looks set to accelerate.

No manager, least of all one investing in Europe, can be fully insulated from the effects of conflict involving Iran. We saw during Covid and in the early stages of the war in Ukraine how shocks to energy, transport and agricultural supply chains can quickly spread through interconnected markets. Higher energy, fertiliser and freight costs would feed into food prices and create broader inflationary pressure.

Our dedicated Maritime team, with 15 industry specialists, more than $4 billion deployed and over 100 vessels acquired, gives us added insight into how global supply chains are being affected.

Where can managers create an edge?

The second question LPs should ask their GPs is how they are positioned to capitalise on these market dislocations. Throughout Hayfin’s history, periods like these have created the conditions for us to grow, gain market share, deepen relationships with borrowers and LPs, and deliver some of our best-performing investment vintages. Uncertainty is not an environment we are waiting to pass. It is the environment we are built for.

The obvious counterargument is that the private credit industry as a whole tends to gain market share from banks and syndicated markets during periods of disruption. The more important question, then, is what positions us to deliver compelling investment returns in a more uncertain environment relative to our competitors.

Our European focus is certainly an advantage. We consider ourselves the European home team, with 17 years of track record and a platform built to operate across fragmented jurisdictions, languages and legal regimes. The distinctive, longstanding opportunity set in Europe, as we have previously discussed, certainly still applies. There remains room for further growth, with the UK and EU’s combined GDP totaling 90% of the US, but with private markets just one third of the size. Additionally, as a shallower market than the US, Europe can reprice quicker in environments like this.

Hayfin’s adaptability and ‘one-firm’ culture, both of which I described earlier this year, are also well-suited for the current landscape. Our broad set of complementary strategies allows us to finance both growth and stress, and to lean into the parts of the market offering the best risk-adjusted returns, as this rapidly shifts around us. By operating in a de-siloed, integrated manner, when markets “flash amber”, we draw on the insights and experience of the whole team to re‑underwrite portfolios, reassess risks and recalibrate pipelines.

Recent market stresses will also affect future investment vintages. One potential second‑order effect of the recent strains in US private credit is that both LPs and borrowers will increasingly favour managers with more conservative approaches to fund structuring. US lenders might pull back from European markets, tipping competitive dynamics in favour of homegrown European managers with more institutional capital.

Patient capital – at scale

Many of the themes discussed here are only beginning to play out. We will remain patient, focusing first on supporting our existing borrowers as the market comes to us.

At the same time, we are preparing to invest selectively through our Tactical Solutions, Special Opportunities and Private Equity Solutions strategies. In these areas, choppier markets and a rising tide of €300 billion in net asset value without sponsor capital support are likely to drive demand for hybrid liquidity solutions.

With a significant undrawn capital position of c. €7bn today, we have the scale and firepower to capitalise on the opportunities that may present themselves in the months ahead.

Hayfin is pleased to announce that it acted as sole lender in providing the debt financing to support Axcel’s acquisition of Geomatikk from Hg.

Geomatikk is a Norway-based provider of mission-critical tech-enabled services for the management and protection of critical infrastructure. Its integrated offering allows for full value chain coverage and underpins significant value-add for infrastructure stakeholders, including network operators, excavators and municipalities. The group has operations in Norway, Sweden and Finland, and recently expanded to Denmark and Spain.

The transaction will enable Geomatikk to cement its leadership in the Nordics and pursue further expansion across other European markets.

Marco Ferrari, Managing Director, Private Credit, commented: “Geomatikk is an established market leader in an attractive and resilient niche, well-entrenched within an ecosystem which it helped build. We are excited to partner with Axcel and the management team, and to support the next chapter of the company’s growth journey. The transaction reflects Hayfin’s commitment to the Nordic region, where we see interesting opportunities for our Private Credit strategy.”

2026 is shaping up to be an important year for portfolio financing markets. A mix of macro uncertainty, evolving CLO technicals, and more selective lender behaviour is influencing pricing and terms in ways that Managers will need to navigate carefully.

For Managers running asset-backed lending (ABL) facilities and subscription lines, being well prepared and well positioned can make a meaningful difference in achieving attractive economics. What follows is our current read of the market—where the opportunities sit, where the risks are building, and how we are positioning to stay ahead of both.

Market Context: CLO and ABL Technicals

European CLO markets entered 2026 from a position of meaningful technical strength. A record number of open warehouses, a deep pipeline of reset candidates from 2024 vintages exiting non-call periods, and an increasingly diversified investor base all underpinned a constructive backdrop heading into the year. New issuance expectations for 2026 range from €50bn to €65bn across major bank research desks, and the European market has now grown to over €300bn in outstanding volume, roughly one third the size of its US counterpart.

The spread trajectory tells its own story. Average primary AAA coupons on European CLOs peaked at around 191 bps in Q2 2023, tightened to 150 bps by Q1 2024, and compressed further to approximately 132 bps on average through 2025—reaching lows of 119 bps in early February 2026 before geopolitical events intervened (Source: Pitchbook, March 2026). The reset wave was a direct consequence: over €49bn in reset deals were printed in Europe in 2025 alone, versus €30bn in all of 2024, as managers raced to lock in lower liability costs before the window closed.

That window has now narrowed. Following the onset of the Iran conflict and associated risk-off sentiment, AAA primary spreads have widened by around 5–10 bps from their February tights, while BB spreads have moved on average 100–150 bps wider across both European and US markets (Source: Pitchbook, March 2026).

That foundation matters for ABL markets, given ABL pricing does not operate in isolation—it has tracked movements in AAA CLO spreads consistently since late 2022. The tightening cycle compressed the ABL illiquidity premium materially and signalled strong lender appetite throughout 2023–2025. The recent reversal, though modest at the AAA level, has been enough to introduce friction into ABL negotiations. Managers planning upsizes in the near term should expect a more careful conversation with lenders than they would have had three months ago.

Financing Environment: ABL Market Dynamics

The ABL market is where the more complex dynamics are playing out. Sentiment here is increasingly tethered to broader CLO market conditions, and the noise has been amplified by negative headlines across software valuations, ABS structures, BDC performance, and leveraged loan and private credit markets more broadly.

The practical effect has been a sharpening of lender scrutiny. Underwriters are asking harder questions about valuation practices and the performance of underlying assets. Peer repricings are becoming more common. Most financing counterparties remain active and engaged—but conservative or less experienced lenders are tightening covenants or simply pulling back, and the bifurcation in lender quality is becoming more pronounced. Managers who built facilities with inadequate covenants or with weaker counterparties during the tighter-spread environment of 2023–2024 may find those relationships less reliable precisely when they need them most.

For those newer to this corner of the market, it is worth grounding the discussion in the mechanics. ABL financing operates at the SPV level, with facilities secured against a defined pool of assets. Lenders monitor collateral performance closely—tracking covenant headroom, leverage ratios, and, increasingly, the quality and consistency of valuation methodology.

The comparison to CLO structures is instructive. Both use asset-level security and structural protections to give lenders confidence in their risk exposure. The key difference is liquidity: CLOs benefit from a more liquid secondary market, which means the illiquidity premium embedded in ABL pricing has historically reflected that gap. As CLO spreads have tightened, so has that premium—but it has not disappeared, and in periods of stress it can reprice quickly.

The two risks managers need to manage actively are asset underperformance risk—where collateral value declines push LTV ratios toward covenant triggers—and liquidity risk, where stressed lending conditions reduce the availability of financing at precisely the moment it is most needed. Neither risk is theoretical at present.

Optionality Under Stress: Hayfin’s Approach to Today’s Market

We have deliberately invested in building in‑house portfolio financing capabilities—dedicated specialists with long-standing lender relationships. This allows us to operate proactively rather than reactively, identifying which facilities should be secured, refinanced, or renegotiated well ahead of market inflection points. Our team’s technical expertise and continuous market engagement mean our clients benefit from preparedness, not pressure.

A recent example illustrates the value of this approach. One of our banking counterparties proposed mid‑facility adjustments to our valuation framework while preserving the agreed economics. Our ability to engage constructively, grasp the technical nuances, and arrive at a practical solution demonstrated the depth of the team, the strength of our lender relationships and our ability to navigate these discussions effectively to achieve strong outcomes for our clients.

A further pillar of our approach is intentional counterparty diversification. Concentrating ABL facilities with a small number of lenders—however strong those relationships may feel in benign conditions—creates an asymmetric vulnerability: when market sentiment shifts, those who rely heavily on one or two banks find their financing options constrained at exactly the wrong moment.

We have structured our lender base deliberately to avoid that exposure, spreading facilities across a mix of Tier 1 banks, regional lenders, and non‑bank counterparties with differentiated risk appetites and funding bases. The result is a portfolio of financing relationships that does not move in lockstep with any single institution’s internal risk appetite or balance sheet constraints. As parts of the lender market become more cautious, particularly among newer entrants, our diversified network ensures we retain a range of established alternatives and can continue to operate with confidence.

We also run competitive RFP processes systematically when securing or refinancing facilities. In a market where lender appetite is differentiated and pricing is moving, there is no substitute for a proper process to extract best economics. Platform scale matters here—our size and the breadth of our lender relationships ensure we see pricing and structure across a wide cross‑section of the market, not just what any single bank wants to put in front of us.

Perhaps most importantly, deep market participation gives us real‑time intelligence on what peers are experiencing. Knowing that repricings are clearing—and understanding which lenders are driving that activity versus which are retrenching—allows us to calibrate our own negotiations with considerably more precision than relying on market rumour.

The portfolio financing market in 2026 is functioning, but it is far less forgiving. CLO technicals remain broadly supportive, lender appetite is intact, and transactions continue to get done. However, the era of wide lender pools and easily achieved economics has passed for now. Managers who will be best positioned are those who have cultivated strong counterparty relationships, maintained disciplined valuation practices, and built the in‑house expertise and market access to negotiate from a position of genuine insight.

Agility, lender diversification, and data‑driven negotiation have become essential elements of navigating today’s market. At Hayfin, we see preparation as the most effective way to manage financing volatility—staying close to market developments, engaging early with counterparties, and ensuring we approach each discussion with a clear sense of the available options and the right economic outcomes for our clients.

The software sector has found itself back under the spotlight as discussion around GenAI disruption gathers pace. The debate has intensified in recent weeks, after the launch of new AI‑driven tools prompted fresh questions about how quickly established workflows, currently inhabited by software companies, could shift. The accelerating pace at which foundational models are emerging has fuelled a sell-off in public software assets and scrutiny of private markets’ exposure to SaaS models, in both equity and credit.

At Hayfin, this is not a new theme. Early in 2024, we undertook an external review of GenAI‑related risk within our portfolio. Since then, we have embedded the relevant insights into day‑to‑day portfolio management and how we underwrite and invest in new opportunities. While the 2024 review didn’t point to a need for significant change across our portfolio, the result is that our exposure to the space today is deliberate, regularly measured and grounded in a clear view of where software remains resilient.

Across our Direct Lending strategy, software makes up less than 8% of fair value. It is worth recognising that, until very recently, software businesses were among the strongest performers in many institutional portfolios, and for a large number of these companies, the core fundamentals have not changed – they remain well‑run, cash‑generative assets with attractive return profiles. Performance across the software businesses within our portfolio remains in line with expectations. More importantly, this reflects the focus of our exposure: mission‑critical, workflow‑embedded software rather than content generation tools or basic analytics tools or platforms.

These companies sit deeper in customer processes, often underpinning core operational activities where reliability, specificity and domain knowledge matter. In our view, this type of functionality is structurally more difficult to disrupt, even as AI capabilities continue to evolve. Where these businesses also benefit from specialist sponsor ownership, the resilience is further reinforced through disciplined product development and operational support.

Source: Hayfin; data as at 31 December 2025

A commonly used lens for assessing software business quality is the Rule of 40. It’s a rule of thumb that measures whether a business’s annual revenue growth rate and its EBITDA margin, expressed as percentages and added together, exceed 40. It provides a simple measure of whether a company can balance growth with profitability – two characteristics that, when combined, tend to signal durable market positioning and a more sustainable long‑term operating profile. Businesses that consistently sit above this threshold often demonstrate strong customer value, efficient cost structures and an ability to invest through different cycles.

All companies within our software portfolio currently sit above the 40% benchmark. This is intentional. We prioritise businesses with diversified value propositions, meaningful customer embeddedness and the ability to sustain high margins alongside ongoing growth. We believe these attributes matter more, not less, in an environment where new technologies can alter competitive dynamics.

While industry commentary around GenAI continues to evolve, our approach remains rooted in fundamentals. Our focus is on software that sits at the heart of customer operations, with business models displaying clear relevance and the operational resilience required to manage both periods of change and across cycles. In practice, that means staying disciplined and backing businesses built to endure and generate stable cashflows rather than those chasing short-term momentum or reward.

Our industry is undergoing rapid change. When Tim and I first started Hayfin in 2009, private markets were still in their infancy. The term ‘private credit’ was yet to enter the mainstream. Fast-forward to 2026 and the asset class has grown considerably.

Media, regulators and governments now take a keen interest in what we do. Capital allocations – first from institutional clients, but increasingly from high-net-worths – have risen exponentially. Global private credit AUM has more than trebled in the past decade to over $1.5trn.

In this more mature market, investors are rightly asking their managers what sets them apart from the competition.

We’ve always answered this question with reference to three key competitive advantages:

We see these three attributes becoming cornerstones of the industry’s most successful players.

As our platform has evolved over the past year, following the completion of our management buyout and the addition of Mubadala, Samsung Life and AXA IM Prime as shareholders alongside Arctos, these three differentiators ring even truer for Hayfin today.

Why scale matters

Market access has historically been a barrier to entry in private credit. We’ve previously outlined why that’s particularly the case for the fragmented European market.

However, we believe the size of our platform, reach of our network and depth of our proprietary data – gathered over more than 15 years, in the course of investing over €55bn into 500+ companies – should help us to continue retaining and growing lending relationships with high‑performing businesses in the years ahead.

With higher interest rates dragging on transaction activity in the post‑Covid period and slowing deployment for many funds, incumbency has proved a competitive advantage. Approximately half the capital deployed in our direct lending strategy over the past two years has been extended to existing borrowers. With €30bn of assets in the ground today, the opportunity to extend capital to existing borrowers will remain an important source of deal flow for Hayfin. That means we can maintain steady growth independent of broader M&A market cycles.

As AI adoption within private credit accelerates, and technology is increasingly used to crunch numbers and supplement human judgement during the underwriting process, we believe it’s the managers with the largest pools of historic investment data who will be best placed to generate insights.

Finally, we expect the benefits of increased fund sizes and lending capacity to intensify over time. A larger capital base and the ability to make bigger commitments should strengthen GPs’ hands, helping them achieve greater portfolio diversification and negotiate improved terms. With deal sizes continuing to rise, access to capital and close partnerships with blue‑chip LPs will be essential to remaining relevant.

How to adapt amid volatility

With continued volatility across markets and geopolitics, being dynamic and adaptable is crucial. European capital markets are smaller and less efficient than their US counterparts, and the risk‑return trade‑off can shift quickly. To counter this, we have deliberately designed our business to be able to pivot to capitalise on value and opportunity. This is reflected in our broad product suite, which enables us to serve the needs of both borrowers and LPs.

The emerging opportunity within asset‑backed lending is one such example. We are seeing increasing client interest in Europe in asset‑backed deals, as investors become more familiar with private credit and seek more complex, higher‑return and less commoditised opportunities. These types of investments have been a key focus of Hayfin from day one, with €12bn deployed to date, largely through the dedicated expertise we’ve built in sectors such as healthcare, real estate and maritime.

The benefits of flexibility are likely to keep rising alongside the evolution of the asset class. New deployment opportunities should emerge as private credit finances an ever‑increasing cross‑section of European economic activity. That steady expansion of private markets has driven the Bank of England’s inaugural exploratory analysis into how they intersect with the UK real economy, which we’re pleased to be participating in this year.

What a one‑firm culture means

The final ingredient to Hayfin’s success is our single‑firm culture. It has always been our aspiration to be Europe’s most integrated platform. If investors are looking for a multi‑boutique or a ‘pod shop’, there are many fine examples in the market. We aren’t one of them.

The Hayfin team now owns a substantial majority of the GP, and most of our employees are shareholders. This breadth of ownership is an important differentiator for a company of our type and size. That level of independence, autonomy and ownership creates value for LPs by enabling us to continue executing at pace and investing in the next generation of Hayfin leaders.

When we founded Hayfin in 2009, our ambition was to be a first mover capitalising on the emerging opportunity in European private credit. By building scale, resilience and adaptability in a firm that understands the power of collaboration, we believe we have created a platform for all investment environments. In today’s world – characterised by heightened risks and uncertainties alongside abundant opportunity – this flexibility is paramount.

Hayfin continues to be well positioned to support its clients, and I’m excited for what’s to come in the rest of 2026 and beyond.

Hayfin has successfully completed a €550 million refinancing for Juvisé Pharmaceuticals. The transaction includes €400m of existing debt and a new €150m capital expenditure line fully dedicated to future M&A opportunities.

The refinancing follows Juvisé’s 2024 capital reopening, during which BPI France and Pemberton joined the company as shareholders when acquiring Ponvory® rights from Johnson & Johnson. This latest restructuring underscores Juvisé’s strong financial position and robust operational strength, with its entire portfolio now fully integrated.

The refinancing continues to strengthen Juvisé’s financial flexibility, extending its debt maturity profile and providing additional resources to support future growth initiatives, including potential M&A opportunities.

Howard Rowe, Portfolio Manager and Co-Head of Healthcare Investing at Hayfin, said: “We are looking forward to supporting Juvisé in this next phase of its development. We believe the company has demonstrated consistent operational discipline and a strong historic track record of integrating and scaling essential medicines. This refinancing strengthens an already solid foundation, and we look forward to continuing our partnership as Juvisé pursues its growth strategy.”

Alban Senlis, Managing Director and Head of France at Hayfin, added: “Juvisé has continued to build a resilient platform, delivering essential medicines and effective execution. This refinancing gives the team the flexibility to pursue new growth opportunities with confidence as they enter a promising new chapter.”

Frédéric Mascha, Founder and CEO of Juvisé Pharmaceuticals, said: “This refinancing is a key milestone for Juvisé, strengthening our financial position and enabling us to continue delivering on our growth with the ambition to acquire and commercialize new essential medicines for patients. We are delighted to finalize this operation with our longtime partner Hayfin, whose long-term approach and healthcare capabilities make them an ideal partner to support our growth.”

White & Case served as legal advisor to Hayfin on the transaction. Juvisé was provided legal counsel by Latham & Watkins, with Lazard acting as a Special Advisor.