Private credit has been the defining success story of the post-financial crisis era in alternative investment management. The structural disintermediation of banks from corporate lending created a genuine and durable opportunity, and the managers who built direct lending businesses in the years that followed generated returns that, for much of the period, were both attractive in absolute terms and impressive relative to the risk being taken.

Writing in early 2026, the backdrop is more complex than it has been for some time. The collapses of Tricolor Holdings, a Texas-based subprime auto lender, and First Brands Group, an auto parts manufacturer, within the same month in late 2025 exposed, in both cases, hidden liabilities and collateral misrepresentation of a scale that creditors and auditors had not detected. Months later, the administration of Market Financial Solutions, a London-based specialist property lender with a loan book of approximately £2.4 billion, brought further allegations of double-pledging and a collateral shortfall that rattled major institutional lenders. The sentiment consequences were significant: shares in several banks and alternative asset managers fell sharply on the news, and J.P. Morgan’s chief executive publicly warned that more problems might be lurking elsewhere. Meanwhile, firms such as Blackstone and Blue Owl, two of the largest players in private credit, faced redemption requests at levels described as unprecedented for the industry.

Existing commentary tends to portray these events as either idiosyncratic isolated events, or at the other extreme a symptom of systemic failure. Our view is that these events deserve honest assessment rather than either dismissal or alarm. What they represent, taken together, is a timely and uncomfortable test of the underwriting disciplines, governance structures, and liquidity frameworks that the private credit industry has built during years of rapid growth and relatively benign credit conditions.

The structural case for private credit remains intact. But the conditions of the current market are different from those of the decade that made the asset class’s reputation, and the questions being asked of it right now are legitimate ones. This paper sets out our current thinking: what remains compelling, what has changed, where the real risks lie, and how investors should be positioning themselves.