What are you seeing in Private Credit and what are read throughs to broader credit?
Sam Acton, CFA Portfolio Manager, Co-Head Fixed Income
After several years of rapid growth and steady performance, private credit has come into the market's focus recently for three key reasons. The sector carries high exposure to software companies that could face potential disruption from AI. Several rapid collapses in certain loans have brought into question the reliability of NAV marks. And increased redemption pressures have led several fund managers to gate their funds.
A key question from advisors has been whether these developments could spill over into broader credit markets. We have observed some selling pressure in loans, where exposure to software issuers is also relatively concentrated, as reflected in the Invesco Senior Loan ETF (BKLN). We have also seen moderate spread widening in both high-yield and investment-grade credit, although flows into public credit markets have remained largely supportive and overall fundamentals remain solid outside of a few problem sectors.
It is important to remember a few of the attractive features that helped private credit grow significantly over the last decade. These are primarily secured loans, ahead of shareholders in the capital structure, meaning, if private credit was truly in trouble, Venture Capital and Private Equity would likely have a much more severe impact. Most vehicles were set up with intentional limits on liquidity, as fund managers recognized the illiquid nature of the assets and didn’t want to be exposed to investor sentiment. Finally, credit losses and defaults are simply a part of the lending business. That is what the credit spread is there to compensate lenders for.
We continue to monitor three indicators to gauge investor sentiment:
Publicly traded Business Development Companies’ (BDCs) stocks and bonds, as well as redemption and flow trends
Software sector equities
Loan market spreads and flows
Based on what we’re seeing today, we do not anticipate contagion risk spreading into broader public credit markets. Over time, we would expect to see greater dispersion in credit performance across private credit managers, as some may have made better loans and would likely avoid potential credit losses.
Connect with the Author on LinkedIn
Meet Sam ActonThis material has been provided as a general source of information, is subject to change without notification and should not be construed as investment advice. This material should not be relied upon for any investment decision and is not a recommendation, solicitation or offering of any security in any jurisdiction. The information contained in this material has been obtained from sources believed reliable, however, the accuracy and/or completeness of the information is not guaranteed by PICTON Investments, nor does PICTON Investments assume any responsibility or liability whatsoever. All investments involve risk and may lose value. This information is not intended to provide financial, investment, tax, legal or accounting advice specific to any person, and should not be relied upon in that regard. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.
This material contains “forward-looking information” that is not purely historical in nature. These forward-looking statements are based upon the reasonable beliefs, expectations, estimates and projections of PICTON Investments as of the date they are made. PICTON Investments assumes no duty, and does not undertake, to update any forward-looking statement. Forward-looking statements are not guarantees of future performance, are subject to numerous assumptions, and involve inherent risks and uncertainties about general economic factors which change over time. There is no guarantee that any forward-looking statements will come to pass. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made.
Any review, re-transmission, dissemination or other use of this information by persons or entities other than the intended recipient is prohibited.
Commissions, trailing commissions, management fees, performance fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns.
© 2026 Picton Mahoney Asset Management. All rights reserved.
