Investors are dumping publicly traded private credit funds as mounting losses on bad loans spark concerns about the $2 trillion industry. Business development companies, or BDCs, are trading at 82 percent of asset value, their biggest discount since late 2022, according to FT calculations based on the S&P BDC index. The vehicles, which traded above par last September, are facing intensified pressure after several funds recently wrote down loan values.

The sell-off accelerated following write-offs at funds managed by KKR, BlackRock, New Mountain, Apollo Global, and Blackstone over the past two weeks. The slump began last September when the Federal Reserve started lowering interest rates, weighing on loan returns. The high-profile collapse of auto companies First Brands and Tricolor that month heightened fears about corporate credit quality. Many affluent retail investors had been attracted to BDCs by high dividends, with annualized total returns exceeding 8 percent over the past decade, according to S&P Global.

Recent dividend cuts and asset sales have "reignited credit-cycle fears" across private credit, said Paul Johnson, an analyst at KBW. BlackRock's fund has posted a total return of minus 43 percent over the past year and is trading at more than a 50 percent discount to net asset value. "We're playing defence