Across houses, 2026 is framed as constructive but clearly later‑cycle for private credit: spreads have compressed, defaults are normalizing higher from low levels, and dispersion by borrower size, vintage and structure is rising rather than a systemic crisis looming. Goldman and JPAM still see private credit offering a yield premium vs public loans/HY, but stress that this premium has narrowed and is now "earned" only via structure and manager skill, not beta Goldman p.35; JPAM p.65–67]. KKR, JPAM and HSBC all flag rising PIK/"shadow defaults" and weaker docs as key fault lines, with KKR assuming HY‑style default rates of ~2.5% and lower recoveries going forward as a proxy for normalized loss assumptions KKR p.9–10; JPAM p.71–72; HSBC p.31]. High‑level numbers: private credit default rates are generally cited around 5% vs ~2.6% in US HY and ~4.3% in broadly syndicated loans BofA p.9], with PIK‑bearing private loans now ~10–11% of portfolios and more than half of those added post‑origination Goldman p.34–35; JPAM p.72]. The dominant 2026 narrative: stay in private credit, but move up in quality and structure (senior, sponsor‑backed, asset‑backed, private IG) and treat 2021–22 vintages and lower‑mid‑market borrowers as the weak link.
Dovish/constructive on broad private credit (T. Rowe, HSBC, Brookfield). These reports frame private credit as structurally attractive: equity‑like contractual yields on senior secured, covenant‑protected loans with still‑low defaults and strong demand HSBC p.30–31; T. Rowe p.13; Brookfield p.28, p.31]. They expect returns to normalize toward historical averages but emphasize that illiquidity premia remain intact and that idiosyncratic defaults are manageable with good underwriting HSBC p.6; Brookfield p.31; T. Rowe p.13].
Moderate but selective (Barclays, BlackRock, Goldman, JPM, UBS). Barclays links private‑loan performance tightly to Fed cuts (floating‑rate relief) but insists on "highly selective, credit‑first" senior lending to non‑cyclical sectors Barclays p.27–28]. BlackRock and Goldman see a "more uneven phase": big managers and higher‑quality borrowers remain resilient, while smaller borrowers and weaker structures exhibit rising covenant defaults and PIK usage BlackRock p.12; Goldman p.34–35]. JPM and UBS stress that the premium vs public credit is still there but compressed, so they recommend investment‑grade private credit, secondaries and opportunistic/distressed as more defensive plays JPM p.11; UBS p.40, p.52].
Hawkish on weak vintages/structures (JPAM, KKR). JPAM documents 11.4% of private loans now with PIK vs 6.6% in 2021, over half "bad PIK" added after underwriting, with average LTVs jumping from 45% to 82.7% (≈6% shadow default) JPAM p.72]. KKR similarly warns that too much credit was extended on weak terms in 2021–22, expecting higher‑severity losses particularly in over‑levered roll‑ups in software and healthcare KKR p.5, p.8]. Both still like private credit overall but insist on "High Grading" – private IG, ABF and structured capital rather than plain‑vanilla unitranche KKR p.24, p.80–81; JPAM p.68–70].
Size: BlackRock's data show covenant defaults concentrated in smaller borrowers, with much higher default rates for <USD 10–30m EBITDA issuers BlackRock p.12]. UBS and HSBC explicitly tell investors to limit lower‑mid‑market exposure UBS p.40; HSBC p.31]. Goldman's coverage‑ratio distribution implies 55–60% of borrowers (coverage ≥1.5x) have ample equity cushion, but ~15% (coverage <1x) are already under water on interest Goldman p.34–35].
Sector: Barclays and KKR favor software, healthcare services and essential business services where earnings are more resilient Barclays p.28; KKR p.8]; at the same time, KKR and JPAM explicitly avoid software/healthcare roll‑ups levered on peak multiples and low rates KKR p.8, p.25; JPAM p.71–72]. Brookfield and JPAM both highlight real estate and infrastructure as sectors where collateral and inflation‑linked cashflows anchor recoveries Brookfield p.29–30; JPAM p.68–69].
Region: JPAM, Brookfield and KKR see Europe as fertile ground for real estate/private credit given banks' large market share and CRE maturity walls Brookfield p.29; JPAM p.68–70; KKR p.8]. Goldman and JPAM flag Asian direct lending as an early‑stage but structural growth area Goldman p.35; JPAM p.70].
Senior secured / private IG. Brookfield, KKR, UBS and JPAM converge on senior secured and private IG credit as the core 2026 play: stronger covenants, lower defaults, and attractive spread pick‑up vs public IG given compressed AAA–BBB corporate spreads Brookfield p.31; KKR p.6, p.24; UBS p.40; JPAM p.67].
Mezzanine, capital solutions, secondaries. Goldman and JPAM both see mezzanine/private secondaries and capital‑solutions as alpha‑rich, if approached with deliberate PIK terms and conservative underwriting Goldman p.35; JPAM p.70–72]. KKR highlights structured equity and capital‑solutions as under‑crowded, high‑convexity exposures tailored to better credits KKR p.80–81].
ABF & secured/structured credit. JPAM and KKR are particularly bullish on asset‑based finance (consumer receivables, mortgages, leases) where collateral, reserves and data allow fine‑tuned pricing and "complexity premia" JPAM p.70; KKR p.15, p.80–81]. Brookfield and T. Rowe echo this in asset‑backed finance/mortgage platforms Brookfield p.31–32; T. Rowe p.13].
Into 2026, the investable takeaway is not to abandon private credit but to upgrade it: concentrate exposure in senior, sponsor‑backed, asset‑backed and private‑IG structures, keep a hard line on documentation/PIK, and treat small‑borrower and 2021‑vintage risk as radioactive unless priced for roughly ~5%+ default regimes vs ~2.6% in US HY BofA p.9; JPAM p.72]. In this configuration, most houses still see private credit delivering a meaningful yield premium of ~200–300 bps over loans/HY with manageable, non‑systemic losses, but only for investors willing to be highly selective and structurally senior JPAM p.7, p.67; KKR p.10, p.24].
| Source | Content |
|---|---|
| Goldman Outlook - Summary | n.a. |
| Blackrock Outlook | Private credit is described as entering a “more uneven phase” where dispersion and a looming shakeout make it a selective, alpha‑driven allocation rather than a broad beta substitute for public credit [p.12]. Public credit is used more tactically across IG, HY, EM and agency MBS with distinct over/underweights, while infrastructure debt (including private) is framed as a key strategic, income‑oriented and liability‑matching exposure [p.13, p.16]. |
| Barclays Outlook | Private credit is framed as a constructive, complementary exposure to public credit for 2026, with emphasis on income and diversification via senior secured direct lending in resilient sectors while public markets (especially higher‑quality BBB/BB bonds and hybrids) remain the core liquid credit allocation [p.21][p.27–28][p.45–46]. Private credit’s appeal is linked to its floating‑rate nature and to upcoming improvements in M&A and exit activity, and it is positioned as an area for “highly selective” deployment rather than broad beta [p.27–28]. |
| Brookfield Outlook | Private credit is structurally attractive but requires strict discipline, with investors still willing to pay for illiquidity (~150 bps premium in direct lending) while spreads across public and private markets have compressed and capital is plentiful [p.28, p.31]. Within private credit, capital is expected to increasingly flow toward higher‑quality strategies such as private investment‑grade and asset‑backed/real‑asset credit, rather than simply adding generic sub‑IG beta [p.28, p.31–32]. |
| Goldman Outlook | Private credit is characterized as fundamentally sound with attractive value and higher yields than public credit, but positioned as a more dispersion‑heavy, alpha‑driven complement to broadly constructive stances in public HY, IG (especially banks), securitized credit, and EM debt, all benefiting from mid‑cycle corporate fundamentals and carry at the start of an easing cycle [p.7, p.10, p.25, p.35]. Public credit remains a core income/carry allocation, while private credit is framed as an area for selective, benchmark‑unconstrained underwriting and structural growth in under‑penetrated segments rather than a wholesale replacement [p.25, p.35]. |
| HSBC Outlook | Private credit is framed as a structurally attractive asset class delivering equity‑like contractual yields with low correlation to equities, discussed as a complementary allocation alongside a core focus on public IG and EM credit rather than as a dominant portfolio anchor [p.17][p.18][p.30–31]. Structural features such as floating‑rate, senior‑secured, covenant‑protected loans with moderate leverage position private credit as a defensive income sleeve within broader multi‑asset portfolios [p.30–31]. |
| JPM Outlook | |
| JPAM Outlook | Private credit is positioned as a core, growing part of the overall credit toolkit, offering an illiquidity, yield and documentation premium versus broadly syndicated loans and high yield, though this premium is narrowing and returns will depend more on manager skill than beta [p.64–67, p.72]. Credit is treated as a unified spectrum where public–private convergence gives borrowers more refinancing options and investors a broader relative‑value set, with senior‑secured U.S. direct lending favored over public HY/loans on risk‑adjusted terms [p.65–67]. |
| KKR 2026 Outlook | Private credit is a central way to “High Grade” portfolios by moving into higher‑quality structures with collateral and better documentation, especially via private investment grade origination that offers a yield premium to public IG with stronger protections [p.7–8, p.24, p.80–81]. Within the credit allocation, private IG, ABF, CLO liabilities, and capital solutions are positioned as core building blocks alongside public IG/HY, with direct lending viewed as more “efficient frontier” than standout [p.80–81]. |
| Stifel Outlook | n.a. |
| RIC 2026 BAML | Private credit is implicitly de‑emphasized versus public credit, with US HY described as higher quality than loans or private credit and as presenting the best opportunity in credit in 2026 due to lower defaults and beneficial duration [p.9]. Regulatory shifts (withdrawal of leveraged lending guidance, potentially supporting over $1tn in bank lending) are framed as partly motivated by worries about private credit growth and as a structural tailwind for banks and public markets [p.16]. |
| TRowe Outlook | Private credit is positioned as a major structural growth area alongside an overweight stance in public credit, benefiting from a roughly USD 1.2 trillion financing gap tied to PE dry powder and from banks’ retrenchment, with elevated origination volumes expected to complement, rather than displace, public HY and loans in income‑oriented portfolios [p.11][p.13]. |
| UBS Year Ahead | Private credit/direct lending is positioned as a complementary, higher‑income satellite to a core allocation in quality public fixed income, with quality government and IG corporate bonds highlighted as the main sources of yield, diversification, and portfolio ballast (15–50% of total assets, duration 5–7 years) [p.39–41]. Investors with outsized private credit allocations are encouraged to diversify into other alternatives, underscoring that public credit remains the core credit exposure [p.52]. |
| MS - 2026 US Equities Outlook - The Rolling Recovery Is Here | n.a. |
| Source | Content |
|---|---|
| Goldman Outlook - Summary | n.a. |
| Blackrock Outlook | Stress in private credit is characterized as “concentrated, not contagious,” with covenant defaults and losses expected to be more pronounced among weaker structures and smaller borrowers as part of a “normal and necessary correction” after a benign cycle [p.12]. Defaults are expected to rise in a challenging economic environment, with potential masking of stress via restructurings and PIK, but without signaling a systemic default wave across the asset class [p.12]. |
| Barclays Outlook | Default rates in private credit are described as “ticking up,” with pressures concentrated in highly levered borrowers and in consumer services and healthcare, implying late‑cycle dynamics and rising idiosyncratic loss risk rather than an immediate systemic default wave [p.28]. Stress in certain US lending segments is cited as “events” rather than systemic signals, reinforcing a cautious but not crisis‑level stance on credit risk [p.21][p.28]. |
| Brookfield Outlook | No evidence is seen of a systemic wave of defaults, with direct lending and high yield default rates during 2024–25 viewed as in line with historical averages and well below GFC and Covid peaks [p.28, p.31]. Infrastructure and project finance loans have historically much lower cumulative default rates and higher recoveries than generic non‑financial corporates, reinforcing a focus on defensive, essential‑asset credit [p.30]. |
| Goldman Outlook | Credit conditions are assessed as mid‑cycle with recent credit events described as idiosyncratic, not systemic, and private credit defaults have been “muted so far” thanks to solid borrower fundamentals and proactive refinancings that pushed out maturities [p.7, p.26, p.34]. Around 15% of private credit borrowers have sub‑1.0x interest coverage and face elevated default risk, but historical private credit recoveries around 65% imply mid‑single‑digit loss rates even if this cohort were to default, supporting a non‑systemic loss outlook through the 2026 refinancing window [p.34–35]. |
| HSBC Outlook | No sharp rise in private credit defaults is expected, with Fitch anticipating a mild drop in defaults and leveraged‑loan default rates “slightly increased but low by historical standards” at under 5% LTM [p.6][p.31]. Recent defaults and governance issues are characterised as idiosyncratic rather than systemic, and overall credit conditions are seen as resilient with no systemic crisis foreseen, even as negative headlines and spread volatility persist [p.21–22][p.31]. |
| JPM Outlook | Recent large borrower defaults in private credit and leveraged loans are issuer‑ and auto‑sector‑specific rather than signaling broad systemic risks, with recession viewed as unlikely in 2026 though economic concerns persist and “pockets of risk may exist.” [p.11] |
| JPAM Outlook | Early stress signals in private credit (liability management, higher PIK usage, selected bankruptcies) are framed as issuer‑specific rather than systemic so far, but a rising share of “bad PIK” with LTVs jumping from 45.1% to 82.7% implies a shadow default rate of ~6% and underscores vulnerability if growth slows [p.7, p.71–72]. Tight spreads co‑existing with weakening micro fundamentals and a potential macro downturn set up asymmetric risk, making flexible and defensive positioning important to navigate any future default wave [p.68–69, p.71–72]. |
| KKR 2026 Outlook | Credit losses are expected to normalize higher from extraordinarily low levels, with default rates rising towards post‑2011 averages (~2.5% over the next five years) but remaining well below GFC/dot‑com peaks, implying rolling sectoral and vintage‑specific stress rather than a systemic private‑credit crisis [p.7, p.9–11]. Higher losses are already visible in bank loans and direct lending, and more normalization is anticipated into 2026, particularly around 2021 vintages and sub‑scale businesses [p.5, p.10, p.14, p.80]. |
| Stifel Outlook | n.a. |
| RIC 2026 BAML | Private credit is characterized as having a materially higher current default rate (~5%) than broadly syndicated loans (4.3%) and HY (2.6%), implicitly flagging higher risk in that ecosystem relative to public markets [p.9]. Broader comments about regulatory concern over private credit growth and the push to bolster bank lending reflect a cautious stance on systemic risk [p.16]. |
| TRowe Outlook | Private credit fundamentals are described as robust, with low default rates expected to remain low and idiosyncratic collapses (e.g., First Brands, Tricolor) framed as isolated issuer‑specific risks rather than signs of a systemic default wave [p.13]. |
| UBS Year Ahead | n.a. |
| MS - 2026 US Equities Outlook - The Rolling Recovery Is Here | n.a. |
| Source | Content |
|---|---|
| Goldman Outlook - Summary | n.a. |
| Blackrock Outlook | Within credit tied to structural themes, both investment‑grade and sub‑investment‑grade infrastructure debt are favored for income and liability‑matching, with HY infra offering relatively attractive spreads and IG infra benefiting insurers through capital efficiency and partial inflation linkage [p.13]. |
| Barclays Outlook | Senior secured direct lending to resilient, non‑cyclical sectors—specifically software, healthcare services and essential business services—is highlighted as best positioned for 2026, with a clear preference for prudently capitalised borrowers in “tariff‑proof” industries and a credit‑first approach over riskier mezzanine or highly levered structures [p.28]. |
| Brookfield Outlook | Strong preference is expressed for asset‑backed and real‑asset credit—real estate credit, infrastructure debt, and asset‑based finance—along with private investment‑grade exposure to “credit‑worthy high‑grade borrowers,” while exercising significant caution in sub‑investment‑grade direct lending despite its illiquidity premium [p.28–31]. Within sectors, housing‑related real estate (given structural undersupply), selective office, digital and energy infrastructure tied to AI and energy transition, and consumer/mortgage ABF platforms with disciplined, data‑driven underwriting and strong servicing are favored, typically with senior, collateralized, contractual cash‑flow structures [p.29–32]. |
| Goldman Outlook | Preferred private credit segments include mezzanine strategies where PIK is intentionally structured from inception and underwriting is disciplined, plus under‑penetrated niches such as real estate credit, private asset‑backed finance, Asian direct lending, and credit secondaries, all seen as fertile ground for alpha as M&A and deal activity recover [p.35]. Caution is urged on weaker borrowers and vintages (notably 2021 deals) that face higher refinancing risk, while mezzanine CMBS in public markets is also singled out as an area to avoid due to valuation pressures [p.25, p.35]. |
| HSBC Outlook | Preferred exposures are senior secured, floating‑rate loans with first‑lien claims on high‑quality collateral, moderate leverage and covenant protection, often to service‑oriented, asset‑light businesses that are less exposed to macro/geopolitical shocks [p.30–31]. Lower‑quality segments, especially where underwriting has deteriorated in some wealth‑channel and semi‑liquid vehicles, are approached with greater caution [p.31]. |
| JPM Outlook | Higher‑quality and more defensive segments are preferred, including investment‑grade private credit, broadly diversified secondaries, and opportunistic distressed/special situations strategies that can better weather a slowdown. [p.11] |
| JPAM Outlook | Senior‑secured U.S. direct lending is preferred, offering yields ~200bps above leveraged loans and ~300bps above U.S. high yield while still providing stronger documentation than broadly syndicated loans, particularly in small/mid‑market borrowers [p.7, p.65–67]. Real estate private credit (commercial mortgage, mezzanine/subordinated CRE) and structured/asset‑backed credit, including consumer NPL portfolios (especially in Europe), are highlighted as attractive given conservative LTVs, 5%–10% yields, and strong collateral/covenant packages, while upper middle‑market direct lending and high‑beta HY/distressed are approached more cautiously due to tight spreads and weaker terms [p.47, p.68–70]. |
| KKR 2026 Outlook | Clear preference goes to up‑in‑quality, collateral‑backed structures such as private investment grade loans, asset‑based finance (ABF), CLO liabilities (BBB/BB), and capital solutions/structured equity, which combine higher‑quality borrowers with structural protections and better covenants [p.8, p.24, p.80–81]. Sub‑IG, over‑levered roll‑ups in software and healthcare and late‑cycle, highly levered structures are de‑emphasized, while ABF’s senior, collateralized positions and diversified pools are highlighted as superior to commoditized direct lending for illiquidity premium and risk‑adjusted returns [p.8, p.15, p.25, p.80–81]. |
| Stifel Outlook | n.a. |
| RIC 2026 BAML | n.a. |
| TRowe Outlook | Opportunity is highlighted across traditional direct lending and a broader set of solutions including distressed, rescue capital, preferred equity, mezzanine debt, and bespoke structured financings, all viewed as offering attractive risk‑adjusted return potential for investors capable of rigorous underwriting [p.13]. |
| UBS Year Ahead | Preferred private credit exposure is in higher‑quality direct lending, focusing on sponsor‑backed and senior loans to larger companies in less cyclical, less leveraged sectors, while limiting excessive exposure to the riskier lower middle‑market segment [p.40, p.52]. Spreads are described as tight, so segment selection emphasizes structural protections and business quality rather than reaching for yield [p.40]. |
| MS - 2026 US Equities Outlook - The Rolling Recovery Is Here | n.a. |
| Source | Content |
|---|---|
| Goldman Outlook - Summary | n.a. |
| Blackrock Outlook | Private credit outcomes are becoming highly dispersed, with covenant defaults rising much more among smaller‑EBITDA borrowers than large ones, reflecting weaker structures at the lower end of the market [p.12]. Years of competition and abundant capital amid weak deal flow have compressed spreads and eroded credit standards for some lenders, making manager selection, documentation strength, and workout capabilities “even more crucial” and setting up a shakeout that will distinguish disciplined platforms from others [p.12]. |
| Barclays Outlook | n.a. |
| Brookfield Outlook | Return dispersion in private credit is expected to rise, as outcomes increasingly depend on borrower quality, sector, collateral, and structural differentiation, elevating the importance of disciplined underwriting and risk management [p.28–29]. In ABF and mortgage credit, integrated platforms that combine origination, securitization and asset management with rigorous, data‑driven underwriting and servicing are better positioned to produce stronger credit fundamentals, lower delinquencies, and healthier excess spread profiles [p.31–32]. |
| Goldman Outlook | Outcomes in private credit are described as meaningfully dispersed, with roughly 55–60% of borrowers (coverage ≥1.5x) having ample equity cushion even under severe multiple compression, 25–30% in a 1.0–1.5x “elevated but managed” band likely needing recapitalization, and 15% already unable to cover interest, highlighting the importance of underwriting quality and active monitoring [p.34–35]. Benchmark‑unconstrained, bottom‑up manager selection is emphasized as critical, since public indices are biased toward heavy issuers, and loan terms such as ex‑post PIK additions serve as key diagnostics of weakening underwriting or fundamentals [p.34–35]. |
| HSBC Outlook | Outcomes are portrayed as increasingly dispersed, with concerns over lowered underwriting standards and signs of credit deterioration in certain wealth‑channel and semi‑liquid private credit vehicles, making rigorous due diligence, manager selection, diversification and strong documentation/discipline critical [p.6][p.31]. Idiosyncratic defaults tied to governance or fraud highlight the importance of robust underwriting and platform quality rather than indicating broad asset‑class weakness [p.21–22][p.31]. |
| JPM Outlook | Compressed credit spreads are driving a renewed focus on credit quality and adequate pricing, implicitly heightening the importance of manager selection and underwriting discipline amid “pockets of risk.” [p.11] |
| JPAM Outlook | Outcomes in private credit are described as increasingly dispersed, with portfolios exposed to aggressive underwriting, cov‑lite structures, portability and “bad PIK” much more at risk than those emphasizing strong covenants, conservative LTVs and sector/sponsor selection [p.66–67, p.71–72]. Documentation discipline, breadth of origination and underwriting rigor are positioned as the main drivers of future alpha, especially as public and private loan docs have shifted toward borrowers and headline defaults understate underlying stress [p.67, p.71–72]. |
| KKR 2026 Outlook | Dispersion across private credit is expected to widen, driven by vintage risk from 2021/22 originations where “too much credit” was extended on shakier terms and by differences in structure, seniority, collateral, and sponsor quality [p.5, p.80–81]. Underwriting discipline, proprietary origination, and strong documentation/covenants—especially in private IG, ABF, and structured solutions—are emphasized as key to avoiding higher‑severity losses that will afflict weaker managers who rushed deployment [p.5, p.7, p.24, p.80–82]. |
| Stifel Outlook | n.a. |
| RIC 2026 BAML | n.a. |
| TRowe Outlook | High‑profile idiosyncratic failures such as First Brands and Tricolor underscore significant dispersion and the need for rigorous due diligence and deal structuring to manage downside risk, implying that manager selection and underwriting discipline are critical to outcomes in private credit [p.13]. |
| UBS Year Ahead | n.a. |
| MS - 2026 US Equities Outlook - The Rolling Recovery Is Here | n.a. |
| Source | Content |
|---|---|
| Goldman Outlook - Summary | n.a. |
| Blackrock Outlook | n.a. |
| Barclays Outlook | n.a. |
| Brookfield Outlook | Real estate credit faces a sizeable refinancing wall, with about $1.9 trillion of loans maturing over the next two years and 2025‑vintage loans priced roughly 150 bps higher than those rolling off, which creates both stress for weaker borrowers and attractive, more insulated entry points for new lenders [p.29]. Banks are retrenching from direct origination but expanding roles in back‑leverage and co‑origination—particularly in Europe—opening space for alternative lenders in senior capital‑stack positions [p.29]. |
| Goldman Outlook | Loans originated just before the rate spike (around 2021–early 2022) are flagged as most vulnerable because roughly a 5% rise in base rates has added 25–30 cents of interest for every dollar of underwritten EBITDA, leaving limited time for earnings growth before refinancing or exit around 2026 [p.34–35]. About 10% of private credit loans feature PIK provisions, with over half of these added post‑underwriting—interpreted as a sign of fundamental deterioration and elevated default risk—while intentionally structured mezzanine PIK can be attractive when properly underwritten; evergreen funds with heavy 2021 exposure are seen as especially exposed to these risks [p.34–35]. |
| HSBC Outlook | n.a. |
| JPM Outlook | n.a. |
| JPAM Outlook | PIK incidence has risen sharply, with 11.4% of loans now including PIK versus 6.6% at end‑2021 and more than half of that increase tied to post‑origination “bad PIK,” effectively functioning as restructurings and implying a shadow default rate around 6% [p.72]. A substantial CRE refinancing “maturity wall” (USD 1.6 trillion maturing in 2 years, USD 2.6 trillion in 4 years) interacts with higher rates and tighter bank standards to create both elevated rollover/default risk for older vintages and a rich opportunity set for new private lenders [p.68–69]. |
| KKR 2026 Outlook | Significant “vintage risk” is identified around 2021/22 originations and sub‑scale businesses, with losses expected to further manifest into 2026, particularly in over‑levered roll‑ups in software and healthcare that face maturity walls and already‑strained free cash flow [p.5, p.8, p.14, p.25, p.82]. Refinancing pressure and capital‑structure stress in these late‑cycle cohorts are flagged as key pockets of downside risk in private and leveraged credit. |
| Stifel Outlook | n.a. |
| RIC 2026 BAML | n.a. |
| TRowe Outlook | n.a. |
| UBS Year Ahead | n.a. |
| MS - 2026 US Equities Outlook - The Rolling Recovery Is Here | n.a. |
| Source | Content |
|---|---|
| Goldman Outlook - Summary | n.a. |
| Blackrock Outlook | Higher system‑wide leverage driven by the AI capex buildout and already‑elevated public debt is expected to keep term premia and yields structurally higher, supporting more credit issuance and financing needs, including in private markets [p.4, p.7]. In private credit specifically, lower buyout and deal activity has already led to excess capital chasing fewer deals, compressing spreads and pressuring standards [p.12]. |
| Barclays Outlook | Fed rate cuts in 2025 are described as a major tailwind for 2026 because floating‑rate private loans see immediate reductions in debt service, lowering default risk [p.27]. A recovery in M&A and exit activity, evidenced by rising exit values across private placements, IPOs, secondary buyouts and trade sales, is expected to boost private credit deal flow in 2026 [p.27]. |
| Brookfield Outlook | Abundant liquidity and tight spreads mean macro and rate volatility create windows of dislocation where disciplined capital can be deployed on favorable terms, while prospective rate easing is expected to catalyze mortgage activity and transaction velocity in ABF and real estate credit [p.28–29, p.31]. Multi‑year capex needs for AI‑driven digital infrastructure, power and cooling, as well as broader energy transition and housing undersupply, are powerful structural tailwinds for infrastructure and real estate private credit deal flow [p.29–31]. |
| Goldman Outlook | A soft‑landing path with gradual Fed easing to around 3.0–3.25% by end‑2026 is viewed as broadly supportive for credit, though even 125bp of rate cuts would only marginally help sub‑1.0x coverage borrowers, implying that operational improvement or recapitalization—not just lower rates—will determine outcomes in stressed private credit names [p.23–24, p.34]. A more robust M&A environment is expected to boost demand for mezzanine and other private credit solutions, while large AI‑related capex and rising hyperscaler leverage are flagged mainly as public credit risks that warrant monitoring [p.27, p.35]. |
| HSBC Outlook | n.a. |
| JPM Outlook | |
| JPAM Outlook | Higher‑for‑longer policy and the recovery of public debt markets have created strong technicals, compressing spreads and intensifying competition for private deals, while rate cuts ahead would reduce income on floating‑rate loans but improve interest coverage and potentially temper defaults [p.64–66, p.68, p.71]. A muted private equity exit/M&A environment has constrained new money deployment even as nearly USD 500 billion of dry powder and refinancing flows from public to private loans support deal activity [p.64–66, p.70–71]. |
| KKR 2026 Outlook | With Fed cuts anticipated, fixed‑rate HY is preferred over floating‑rate loans because loan coupons will decline, indirectly underscoring the appeal of private structures that lock in attractive yields before rates fall [p.80–81]. Broader macro themes—rolling sectoral recessions, normalization of losses, and strong demand for collateral‑backed financing linked to nominal GDP (real estate credit, infrastructure, energy, ABF)—support ongoing deal flow in private credit [p.8, p.11, p.80–81]. |
| Stifel Outlook | n.a. |
| RIC 2026 BAML | n.a. |
| TRowe Outlook | Dealmaking and lending in private markets are “poised for growth” in 2026 as rates stabilize, IPO and M&A activity revive, and large AI‑related infrastructure and broader fiscal‑driven capex create substantial financing needs that support strong private credit deal flow [p.11–13]. |
| UBS Year Ahead | n.a. |
| MS - 2026 US Equities Outlook - The Rolling Recovery Is Here | A more accommodative Fed with rate cuts and an end to QT, easing bank credit standards, and a forecast “major, multiyear rebound” in global M&A supported by $4.2T of private‑markets dry powder collectively imply strong tailwinds for sponsor‑backed deal flow and private‑market financing capacity, though without analyzing private credit specifically [p.11, p.31–32, p.56–57]. |
| Source | Content |
|---|---|
| Goldman Outlook - Summary | n.a. |
| Blackrock Outlook | Retail flows into semi‑liquid private credit vehicles are flagged as pro‑cyclical and potentially volatility‑amplifying in periods of stress, adding a liquidity and flow‑dynamics layer to risk management in the asset class [p.12]. Data opacity in private markets, including stress masked by restructurings and PIK, heightens the importance of transparency and ongoing monitoring beyond headline default statistics [p.12]. |
| Barclays Outlook | Private credit is linked to broader private markets dynamics, including the attractiveness of private equity secondaries (LP‑ and GP‑led) as a resilient strategy and the shift in value creation away from leverage toward operational improvements in portfolio companies, which indirectly affects credit quality and sponsor behavior [p.25–27]. |
| Brookfield Outlook | Discipline is both a defensive stance and an offensive advantage in a world of tight spreads and pockets of macro uncertainty, with emphasis on downside mitigation, capital preservation, and exploiting selective dislocations across real estate, infrastructure, defensive corporate lending, and everyday‑economy ABF [p.28, p.32]. Collaboration with banks via back‑leverage and co‑origination, especially in Europe where banks still have outsized lending share, is an important structural feature shaping how private credit capital is deployed [p.29]. |
| Goldman Outlook | Structural growth opportunities are highlighted in newer geographies and asset types—such as Asian direct lending, real estate credit, private asset‑backed finance, and credit secondaries—suggesting private credit’s opportunity set is still expanding and will likely see increasing dispersion and specialization [p.35]. Bank exposures to private equity and private credit (~US$360bn across seven large US banks, about 11% of loans) are acknowledged but assessed as manageable, reinforcing the view that private credit risks are important but not currently systemic for the broader financial system [p.7, p.35]. |
| HSBC Outlook | Rapid growth of the private credit market itself is highlighted as a key issue, with particular scrutiny on wealth‑channel and semi‑liquid vehicles where underwriting has weakened and some deals are already showing credit deterioration, raising concerns about product design and governance even if systemic risk is seen as limited [p.31]. Private credit’s bilateral, non‑traded, hold‑to‑maturity structure is emphasised as both a source of stability and a factor that increases the importance of transparency and monitoring [p.31]. |
| JPM Outlook | Concerns about a potential “bubble” in private credit are acknowledged but challenged by the assessment that recent defaults are isolated, supporting a cautiously constructive stance that emphasizes diversification across private strategies rather than exiting the asset class. [p.11] |
| JPAM Outlook | Growth of private credit AUM from USD 1.7 trillion to a projected USD 3.5 trillion by 2029 underpins the emergence of credit secondaries as a core, higher‑transparency way to access seasoned portfolios and a “liquidity release valve” in downturns [p.64, p.70]. Special situations and opportunistic credit are highlighted as option‑like exposures that could benefit if today’s tight spreads and weakening fundamentals evolve into a broader stressed opportunity set [p.71–72]. |
| KKR 2026 Outlook | Capital solutions/structured equity is highlighted as an under‑crowded hybrid between debt and equity that offers high convexity and non‑dilutive capital to higher‑quality borrowers, representing a differentiated private‑credit niche [p.80–81]. The enormous scale of ABF (~$7.7 trillion investable universe vs ~$1.6 trillion U.S. direct lending) is stressed as a structural opportunity, suggesting private credit growth will increasingly come from specialized, collateral‑heavy segments rather than traditional sponsor‑backed direct lending alone [p.81]. |
| Stifel Outlook | n.a. |
| RIC 2026 BAML | n.a. |
| TRowe Outlook | Banks’ tentative re‑entry into private credit is expected to have limited impact on illiquidity premia because financing needs should continue to exceed available capital, reinforcing the durability of the private credit opportunity set despite evolving competitive dynamics [p.13]. |
| UBS Year Ahead | Strong inflows into private credit in recent years and concerns about overconcentration (with advice to diversify if allocations are outsized) highlight liquidity and concentration risks in this illiquid asset class [p.40, p.52]. Broader alternatives disclosures emphasize illiquidity, valuation lags, and loss risk, which also apply to private credit [p.63]. |
| MS - 2026 US Equities Outlook - The Rolling Recovery Is Here | n.a. |
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