There is so much misinformed fear-mongering about private credit right now.

Important Facts:

1) The majority of private credit funds are classed as "permanent capital". When you put money into these vehicles, you give the Asset Manager discretion over when to give the money back. Redemptions are often gated at ~5% per quarter.

(So there cannot, by definition, be a run on the bank)

2) Credit is senior to equity, so if you expect mass defaults in private credit, it means the majority of private equity is effectively wiped out. Private equity has to be effectively a 0 before private credit takes any losses.

3) The average "recovery rate" for senior secured loans is 80%. Even if private equity gets wiped to 0, the loss that private credit incurs is cushioned significantly by the collateral backing the loan. These are not unsecured loans the borrower can just walk away from.

(The price of senior secured loans dropped by ~30% in 2008, as a worst case datapoint)

4) Default rates on many of the major private credit managers is ~<1% in recent years. There are other estimates stating higher default rates, but that often classifies PIK income as a default. A loan modified and extended with added PIK that ultimately gets repaid is not a "true" default.

5) Finally, it's true that NAVs are likely overstated, but generally it's by a modest amount. Every Asset Manager today could go out tomorrow, mark NAVs down by 20% and suddenly there is no crisis.

(The stocks of Asset Managers have already traded down such that this seems expected and priced in anyway)