Private credit's $2tn sector faces mounting strain as defaults climb. First Brands Group's $6bn loan collapse and Tricolor's fraud-linked bankruptcy last September foreshadowed widening stress. Fitch Ratings reports July defaults hit a record, while Pitch Book LCD data shows the 20 largest BDCs shrank in Q2 as repayments outpaced new lending. Non-accrual loans rose to a median 2.8% of cost, up from 2% in March. Blue Owl's Marc Lipschultz called his portfolio "pristine" in February, but Golub Capital's David Golub now acknowledges "elevated credit stress" and a credit cycle underway. KKR and Blue Owl funds saw repayments exceed originations.

Separately, Chris Hohn's TCI deployed $636mn into Italian luxury hotel loans, including $392mn for Venice's Danieli, betting on pricing power akin to railroads. Yet new supply may pressure rates.

In China, top 10 global PE firms logged zero buyouts this year versus three in 2023, as LPs balk at regulatory hassle. Capital shifts to Japan and domestic funds.