Cloud 9fin Decoding the software lending shock in private credit with MSCI
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Apr 3, 2026 Patrick Warren, Head of Private Credit Research at MSCI, brings data-driven clarity to private markets. He unpacks the recent software sell-off, where stress is showing up first, and why venture debt and BDCs with tech exposure are under pressure. They explore valuation marks, hidden equity and correlation risks, and how managers might be repricing or delaying recognition of losses.
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Software Exposure Drove Disproportionate BDC Sell Offs
- Listed BDCs with heavy software exposure suffered larger repricings after the Claude Cowork announcement.
- Patrick Warren notes some BDCs had >30% software assets and the BDC index fell ~11%, implying ~6% repricing of software assets accounting for leverage.
Venture Debt Writedowns Preceded IT Concerns And Hit Healthcare First
- Venture debt showed rising fair value write downs earlier in Q3, initially concentrated in healthcare rather than IT.
- Patrick Warren highlights venture debt Q3 marks already weakening in healthcare and warns IT stress could appear in drawdown funds when Q4/Q1 data arrive.
GP Marks Lag Market Prices And May Understate Stress
- GP fair value marks are lagged and smoothed versus public markets, so observed write downs likely understate true stress.
- Warren says GP reluctance to mark down and reliance on comps means current marks may mask deeper deterioration until Q1 reporting.