Private credit is no longer a niche asset class. Across Europe and the Gulf, regulators and allocators alike are converging on the same conclusion: this market is too large, too active, and too structurally important to be treated as a sidecar to traditional banking. What began as opportunistic lending in the post-2008 vacuum has evolved into a central pillar of global capital formation — one now demanding its own architecture, risk framework, and governance language.
The numbers tell part of the story. Assets under management in private credit have surpassed $2.1 trillion globally, according to recent estimates, with Europe accounting for roughly a quarter of that total and the Middle East representing the fastest-growing share. Yet the growth story is no longer about yield-hunting; it is about infrastructure — legal, operational, and prudential — that allows private credit to scale responsibly.
The common thread in both Europe and the Gulf is straightforward: encourage origination, raise the bar on controls, and make the rulebook fit the asset class. That alignment between commercial reality and regulatory design explains why the fund chassis — the vehicle through which private-credit exposure is packaged and distributed — has moved from back-office detail to boardroom priority.
AIFMD II: Europe’s Controlled Evolution
The European Union’s revised Alternative Investment Fund Managers Directive (AIFMD II), adopted in 2024, codifies the region’s approach to direct lending. It formally recognises loan-originating alternative investment funds (AIFs) as legitimate vehicles for institutional credit exposure while embedding risk controls that allocators can clearly underwrite.
Under the new framework, AIFMD II sets explicit leverage limits:
-
175% for open-ended AIFs
-
300% for closed-ended AIFs
These are calculated using the commitment method, ensuring consistent transparency across jurisdictions and managers.
For investors, those numbers are not just regulatory detail — they are parameters of comfort. By hardwiring leverage discipline into the directive, the EU gives institutional allocators, from pension funds to insurance companies, a predictable risk boundary in what remains a largely bilateral market.
It also signals a philosophical shift: loan origination by funds is no longer seen as a shadow banking activity to be tolerated, but as a professional, governed alternative to bank lending. The result is a more standardised pipeline for capital — and a stronger basis for fund due diligence, monitoring, and secondary trading.
ADGM: Building a Purpose-Built Private Credit Framework
In parallel, the Abu Dhabi Global Market (ADGM) has gone further by introducing a specialist Private Credit Fund category within its FUNDS Rulebook, complemented by detailed Supplementary Guidance.
This is not just a re-labelling exercise; it’s a ground-up design. The ADGM regime establishes clear eligibility, authorisation, and ongoing compliance requirements for fund managers engaging in origination or participations. It explicitly limits participation to Professional Clients through Exempt Funds and Qualified Investor Funds, meaning only sophisticated capital is channelled into the strategy.
What makes ADGM’s framework distinctive is its calibration: systems and controls are specifically modelled for credit origination and loan management — not retrofitted from equity fund structures. For a market seeking to attract global credit managers while maintaining prudential credibility, this distinction is key.
The outcome is a regime that mirrors the life cycle of private credit itself — origination, monitoring, valuation, and exit — while giving both managers and regulators a coherent operational map. It’s a model many expect to become a reference point for other international financial centres looking to capture the same wave of institutional capital.
DIFC: Speed, Sophistication, and Governance
Just a few kilometres away, the Dubai International Financial Centre (DIFC) has built its own momentum under the Dubai Financial Services Authority (DFSA). The DFSA’s fund framework channels sophisticated money through Qualified Investor Funds (QIFs) and Exempt Funds, both of which operate on a notification basis rather than requiring full product approval.
This approach — lighter on procedural friction but tighter on governance and disclosure — aligns perfectly with the private-credit model. Funds are limited to Professional Clients, which preserves focus on institutional accountability rather than retail packaging.
The DFSA also brings operational efficiency to the table. Turnaround times for complete notifications are typically two business days for QIFs and five business days for Exempt Funds — a responsiveness that has made DIFC particularly attractive for cross-border managers deploying capital into MENA credit markets.
For allocators, the advantage is twofold: faster time to market and clear boundaries around investor sophistication, both of which are critical in maintaining discipline as the asset class scales.
A Convergence of Principles
What connects Brussels, Abu Dhabi, and Dubai is not identical rulebooks but a shared design philosophy: private credit needs bespoke frameworks that respect its underlying mechanics. Traditional fund laws, written for equities or real estate, simply don’t fit the model of dynamic loan origination, portfolio monitoring, and active restructuring.
Europe’s leverage and liquidity parameters, ADGM’s purpose-built regime, and DIFC’s professional-only rails all express the same regulatory maturity — one that recognises that governance and growth can coexist. Each jurisdiction is, in its own way, building a chassis that mirrors how private credit works in practice rather than forcing it into legacy shapes.
The real innovation here is not financial engineering but regulatory engineering: the creation of consistent, auditable structures that can support large-scale capital deployment without compromising stability.
As one fund lawyer in London put it recently, “For the first time, private credit managers can point to a clear, codified path — not just a patchwork of exemptions.”
The Investment Committee Lens
From an allocator’s perspective, this emerging clarity is precisely what the market has been waiting for. Pension funds, insurers, and sovereign wealth vehicles can now benchmark private-credit funds across regions using comparable criteria:
-
Leverage thresholds
-
Investor eligibility
-
Governance oversight
-
Valuation and exit protocols
That transparency helps to integrate private credit more seamlessly into institutional portfolios — moving it from the “alternative” bucket into mainstream allocation.
Platforms and fund managers that align their structures with these evolving frameworks stand to gain the most. In practical terms, that means designing funds whose operational architecture tracks the rhythm of the credit life cycle — origination, monitoring, valuation, and exit — while ensuring compliance under AIFMD II in Europe or the relevant regimes in ADGM and DIFC.
The Road Ahead
Private credit’s rise is not a temporary rotation away from banks; it’s a long-term structural realignment of how capital is intermediated. Europe and the Gulf are leading that evolution — one through harmonised regulation, the other through agile innovation.
As institutional investors grow more comfortable with the mechanics, data, and disclosure standards of these new frameworks, the asset class will only deepen its reach. The next phase will not be defined by how much capital flows in, but by how intelligently that capital is governed.
In that sense, the fund chassis has become more than an administrative vehicle. It is the engine room of credibility — the part of the private credit story where regulation, innovation, and fiduciary confidence finally meet.
