Recent defaults heighten suspicion around private credit
The Bank of England is among those that have expressed concern over the risk of default within private credit (Francais a Londres/Unsplash).
Many asset owners are casting their eyes over private assets, as they see a public market increasingly dominated by AI companies and a growing reluctance among nascent companies to float.
Among the assets under consideration is private credit - where an asset owner essentially lends money to a company on a private market.
But private credit has been in the headlines recently for all the wrong reasons. For a start, we at AOX covered some of the concerns that have been expressed about this asset class, including by the Bank of England.
Furthermore, the very public collapse of First Brands (an American supplier of car parts) under the weight of its debts also brought the opaque private credit market into the spotlight.
So has this meant asset owners across the globe are becoming suspicious of private credit?
Well, we cannot be certain of a causal link, but, according to data from our sister title MandateWire, the inflows into private credit have certainly slowed as 2025 has progressed.
This has held true across several regions, with inflows peaking in Q2 and dropping off in Q3 and Q4 (admittedly we do not yet have the full data for the last quarter of 2025).
The exception is Apac but the data here is distorted slightly by one large sovereign wealth fund making an investment in Q3.
How worried should asset owners be about private credit? Some of the coverage has suggested we are on the cusp of another 2008.
Well, Robert Sears, chief investment officer at Capital Generation Partners — an investment manager for family offices, charities and endowments — says they should be especially worried.
He said: “This is a classic credit cycle. There’s been this wave of easy liquidity so credit underwriting standards get laxer and things get missed, but that’s the usual cycle.
“I don’t think it is systemic in that it is a contagion from private credit which will suddenly bring down the system.
“But there are a lot of people who have been underwriting poorly and you will see more of these defaults come to the surface.”
Sears said a fact that reinforces this point is that companies in a wide array of different sectors were facing private credit defaults over an extended period of time - as opposed to being concentrated in one sector and at the same time.
Whether asset owners buy this narrative is another question.
