Private credit assets climb 17% to $4.1 trillion

Private credit assets under management rose 17% year on year to $4.1 trillion, the Alternative Credit Council said in a report published Oct. 22.

The council argued public sentiment has become “divorced from the market-wide reality.” Its authors, Jiří Król and Cindy Ma, wrote that some credit metrics are improving and that “pressures remain concentrated rather than indicative of broader market deterioration.”

Advisors with clients in BDCs or evergreen credit funds can benchmark them against the report's figures: one-sixth of surveyed funds report non-accrual rates above 5% and respondents on average amended 10.6% of loans.

Ratings agencies are flagging high default rates in private credit, according to the report. Kevin Marchetti, chief investment officer and head of US direct lending at Man Group, said roughly 70% of lender takeovers stem from 2021 and 2022 transactions, “when purchase multiples were unsustainable and rates were low.” That matches the report's argument that stress is concentrated rather than broad.

Software companies are among private credit's biggest borrowers. Fears about AI's effect on them drove investor cash out of business development companies, the report said. Lenders responded with stricter covenants, wider loan spreads and, in some cases, a refusal to extend maturities for companies viewed as more vulnerable to AI disruption.

Michael Small, a partner at KKR, said in the report that the market is looking in the wrong place. “Some software issuers will face stress, but professional services may be more exposed,” he said.

Man Group ended the third quarter with private credit assets of $14.1 billion, flat. The council's 17% covers the whole industry over a year; the Man Group figure is one manager over three months, so the two are not directly comparable.