What is happening in private credit?

Private credit is facing more public scrutiny, but the latest data do not show a broad deterioration in credit quality or returns. Default rates remain around 2%, and aggregate performance still compares favorably with public high-yield bonds, even as some risk measures have risen since rates moved higher in 2022.

Recent worries have centered on isolated bankruptcies and pressure on software borrowers, where A.I.-driven disruption has sparked a sharp reassessment of valuations. Those events matter, but they appear more idiosyncratic than systemic so far.

For investors, the bigger lesson is to stay selective and treat private credit as a long-term allocation. Semi-liquid structures can limit withdrawals when markets are stressed, so liquidity assumptions should be conservative.