Public sentiment about private credit has become “divorced from the market-wide reality,” according to a report from the Alternative Credit Council, which represents fund managers in the industry.
Any healthy market is expected to go through tests, wrote authors Jiří Król and Cindy Ma, pointing instead to the 17% year-on-year increase in assets under management to $4.1 trillion as a sign of growth. Some credit metrics are continuing to improve, they added.
“Pressures remain concentrated rather than indicative of broader market deterioration,” they wrote. The private credit industry has suffered some of its first shocks as a mature asset class this year. Fears around the potential impact of AI on software companies — among the industry’s biggest borrowers — fueled an exodus of investor cash from private credit vehicles known as business development companies. Those concerns have resulted in a broader shift in private credit lenders’ behavior, the report says, such as “requiring additional covenants, increasing loan spreads or in some cases an unwillingness to extend maturities for companies viewed as more vulnerable to AI disruption.”
A number of ratings agencies are currently flagging high default rates in private credit. The report acknowledged some signs of stress, with around one-sixth of funds surveyed reporting non-accrual rates above 5%. In a more promising sign for the industry, the report also found that, on average, 10.6% of loans in respondents’ portfolios had been subject to a significant amendment — down from 11.7% reported in 2024.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing