2026 Private Credit Focus

Executive Summary

Private credit remains resilient despite geopolitical risk, AI disruption and late‑cycle uncertainty, with stress largely idiosyncratic and defaults contained. Volatility is creating opportunity. Wider spreads, higher‑for‑longer rates and bank retrenchment are improving pricing and terms for disciplined lenders. Selectivity matters more than ever. Strong underwriting, lower leverage and durable cash flows will be key to delivering income and downside protection. A world on edge: The start of 2026. It’s safe to say there has been an increasingly critical eye on private credit in recent months. We entered 2026 still grappling with lingering market anxiety from 2025 fueled by headlines related to a series of high-profile bankruptcies and building redemption queues for select private credit vehicles. It seemed this backdrop was being used to manufacture the dawn of a credit crisis driven by late-cycle excesses. The chatter grew louder, but the assumptions were off: Headline issues were company-specific, not systemic. February 2026 marked two developments with meaningful market implications. First, the USS Gerald R. Ford was deployed to the Middle East where a strike on Iran followed. Subsequently, the stock market dipped and the price of oil and gas rose, triggering fears of renewed inflation and damping the prospect for interest rate cuts. For private credit, the implications are twofold: First, volatility may nudge investors to safety, benefitting senior direct lending. It may also instigate a yield premium, and we are already seeing spreads in private credit in the S+500 context once again, up from the mid-400 bps level prior to the strike on Iran. Second, sustained inflation may stunt interest rate cuts, supporting investor yield. The second significant event was Anthropic’s announcement of its Claude AI agents, which triggered a widespread sell-off of traditional software stocks amid concerns about disruption to enterprise software.