Private credit's three core issues are rapid growth/opacity, underlying credit quality across a cycle, and liquidity concerns from retail redemptions.
The asset class is ~$3.5 trillion, direct lending ~1.6–1.7 trillion, and rapid growth makes transparency and cycle-testing central risks.
insights INSIGHT
Software Exposure Is Material But Structurally Cushioned
Software makes up roughly 25% of direct lending exposure and loans are structured as credit not equity, giving lenders cushion via subordination.
Typical loan LTVs near 30–40% mean equity must fall ~70% before lender losses occur, though public markets show wider discounts today.
volunteer_activism ADVICE
Prepare For Retail Liquidity Stress Not Systemic Runs
Expect retail-driven liquidity stress but not broad institutional runs because over 80% of direct lending assets lack retail-style redemption mechanics.
Anticipate retail evergreen funds capping redemptions (commonly 5%) and net outflows into 2026–2027 while institutional dry powder may deploy.
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Goldman Sachs’ Alex Blostein and Vivek Bantwal discuss the market sentiment, fundamentals, and the outlook for the private credit sector.
This episode was recorded on March 19th and 20th.
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