Private credit has grown from a niche institutional asset class into one of the most widely allocated segments of global alternative investing — with total assets under management estimated at approximately $1.8 trillion in the United States alone. For much of the past decade, the asset class delivered compelling risk-adjusted returns, benefiting from the post-2008 retreat of traditional banks from middle-market lending and a sustained period of benign credit conditions.
Today, the environment has shifted. Rising defaults, a wave of redemption requests at major semi-liquid fund platforms, and growing concerns about loan quality — particularly around pay-in-kind (PIK) structures and covenant-lite documentation — have moved private credit from the business section to the front page. At the same time, the structural mechanics of the vehicles through which many investors access this asset class are being tested in a meaningful way for the first time.
This update is intended to explain — plainly and factually — what is happening, why it matters, and how we are thinking about the situation on behalf of our clients. Our view is balanced: private credit is not broken, but it is also not immune from the same economic pressures that affect all credit. We believe the current period calls for heightened diligence, direct communication with our managers, and clear-eyed assessment of each strategy we hold.