After a decade of growth, the asset class is finally facing default rates that look like the loan market it replaced.
Weil's column reports that private credit default rates have moved into the mid-single digits for the first time since the asset class scaled, and that several of the largest BDCs are reporting non-accruals at levels that approximate the syndicated loan market they were sold as a safer alternative to.
We have not had material client exposure to private credit BDCs — the yield premium did not, in our judgment, compensate for the illiquidity and the mark-to-model risk. We are not changing that view. For clients who hold BDC positions through other advisors, we recommend a quarterly conversation about realized vs. accrued yield.
A 15-minute review — an update on positioning.
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