<p>A paradox revisited: Gaining new insights into private credit</p>

Private credit’s institutional adoption began in a period of benign credit conditions and consistent results, but investors are now reacting to emerging risks—defaults, discounted secondary sales and redemption pressures in semi-liquid vehicles.

Borrowers have accepted higher all-in costs because private lenders can execute faster and customize deal terms. Private credit also expanded structurally as traditional bank lending and syndicated markets pulled back after the global financial crisis.

Low reported defaults can be misleading because private lenders are able to extend terms, use liability management exercises or accept payment-in-kind—mechanisms that may avoid a technical default but can slow cash returns and reduce performance.

As competition rises and credit stress builds, net asset value credibility and liquidity terms may be tested. Volatility could increase and outcomes diverge more by underwriting and portfolio-construction skill—making manager re-underwriting and selectivity more important.