Private credit is showing growing stress, with default rates climbing to recent highs and internal loan‑health reviews pointing to tougher times ahead, according to a Wall Street Journal analysis.

Quarterly reports from funds run by the industry’s biggest managers—including Ares Management, Blackstone, Blue Owl Capital and Golub Capital—reveal that loan defaults have reached their highest level since at least 2021, and investor returns are worsening. The funds’ stocks trade on public exchanges, requiring regular updates to shareholders.

While firms such as Blue Owl and Blackstone argue that market fears are overstated and their loan portfolios remain healthy, David Golub, co‑chief executive of Golub Capital, says the sector is clearly in a credit cycle, noting there will be winners and losers but it is not a particularly bad one. Golub emphasized that the cycle is not a crisis but a normal fluctuation that will separate stronger borrowers from weaker ones.

Private‑credit funds deploy client capital into high‑interest direct‑lending loans to heavily indebted companies, a strategy that delivered strong returns until recently and made the market one of Wall Street’s hottest trends. The high‑interest nature of these loans has attracted investors seeking yield, though recent performance concerns are emerging.