Private Credit Manager are performing well even though their reported demise continues.

Author’s note: I wrote this article yesterday but for technical reasons, I had to wait until today to publish it.  Unfortunately, these funds are having a terrible day, they are all down about 5%. Blackstone posted its Q1 2026 earnings and on the surface, the numbers look pretty good. 

Today I watched Nuveen’s webinar: “Cutting through the noise: What are credit markets actually telling us.” Nuveen webinar Cutting Through the Noise  You can watch it on demand. They had several senior investment professionals discuss how they are dealing with the recent noise or uncertainty in the leverage loan, private credit, and CLO markets.  The consensus is that the fears of a meltdown in the credit markets, especially in the private credit markets, are way overblown.  They all predicted loan defaults will continue to be relatively muted and well within historical norms. In juxtaposition to the sky is falling narrative, corporate America is doing just fine.  Even the much-maligned software industry is continuing to perform well, at least for now. However, I do worry about the ability for these firms to refinance these loans in 2028 and beyond (very few loans mature in 2026 and 2027). In fact, these firms are reporting robust Q1 2026 results.  The AI Armageddon is not happening, again at least not yet. 

As the CLOInvestor community will soon find out, I am an opportunistic value investor.  I try to use my detailed knowledge of the alternative investment markets (private credit, leverage loans, private equity, CLOs, and other investment classes) to identify dislocations in the market where asset class pricing is not consistent with its underlying fundamental performance. The CLO equity market is a perfect example of type of investments I am searching for.

The webinar reminded me of another investment that I recently made because I felt that the market was punishing a sector of investment too harshly based upon the noise even though the firms were performing quite well.  About a month ago, I was sick of all the doomsday stories about the private credit markets, and I saw that the stocks of PC firms were in a free fall.  I believe that the underlying performance of PC loans was just fine and the stocks were being too harshly punished.  In the middle of March, I purchased shares of the major PC investment management firms (Apollo, Ares, Blackrock, KKR, and Blue Owl).  At the time these stocks were down YTD between 18% (APO) – 35% (OWL).

I won’t get into details of the bad news that the press was pushing, but I think we all know the story, where every day there was another article or segment about the demise of the PC market.  The entire narrative started last year with the defaults of First Brand and Tricolors and the fact that fraud was involved only made things worse.  Somehow it got lost in all media coverage was that at least First Brand was a broadly syndicate loan (“BSL”).  Jamie Dimon, one of the few Wall Street characters that I truly admire, didn’t help with his now infamous “more cockroaches” comment.  I think the comment wasn’t helpful since defaults happen all the time in the credit markets.  And some of those defaults involve some type of fraud. Then the AI software story became all the rage and things went from down from there.

I am not saying that the PC market isn’t facing any headwinds.  The PC market’s fast growth and heavy competition will certainly cause more hiccups.  Also, these firms got greedy and instead of sticking with public BDCs that provide permanent financing for semi-liquid assets, they set up private BDCs.  These funds were registered with the SEC but not listed on an exchange.  The only way investors could liquidate their investments was by offering their shares for redemption.  Redemptions occurred quarterly and were generally capped at 5% of the funds AUM.  This system worked well until it didn’t.  As money was flooding into PC markets, the gating issue wasn’t a problem, but like many things all sudden it was.

It was absolutely idiotic for Blue Owl to try to merge its private BDC with its public BDC and make the private investors take the 20% hit to NAV.  The whole purpose of investing in the private BDC is that you may have less liquidity but at least you weren’t exposed to the vagaries the market value movement of a public stock.

When public BDCs’ stock started to trade with a significant discount to NAV, the private BDC investors smartly decided to redeem their shares at NAV and invest in the discounted public shares.  The public and private BDCs portfolios were very similar.  At times, they could pick up 10% - 20%+ on the trade.  At least until the shit hit the fan.

Again, I don’t want to minimize the problems facing the PC market.  I plan to write extensively on the market over the coming months.  But in my mind, the larger PC firms issue loans to relatively large companies (EBITDAs of over $150 million with senior credit facilities of $750 million or more). In the past, these companies would have financed their loans through the broadly syndicated loan (“BSL”) market.  So ultimately, there is nothing special about these loans and don’t present any meaningful new risks to the economy.  And while there may not be trading information to help value these private loans.  The BSL market is very large and many of the private borrowers have competitors that finance themselves through the liquid loan market.  The marks of the private borrowers’ competitors loans provide significant insight into the market value of the illiquid private loans.  So, I don’t believe that PC market values are terribly hard to value.  I plan to write an in-depth article on PC market value procedures and hope to an interview my good friend that ran a major third party valuation firm for years.

As the Nuveen panel outlined, the noise doesn’t match the actual underlying performance.  These PC investment firms raised significant amount of capital in first quarter of 2026.  Blackstone reported that they raised $68.5 Billion in the first quarter.

Over the last month, as some sanity has returned to the PC market, the PC investment firms’ stocks are up between 8% - 16%. However, these funds are still down between 12% - 34% YTD.  I really don’t know how to value these firms so I don’t know whether these firms will recoup their 2026 losses but according to Wall Street analysts, they still have some upside.  My KKR investment is up 22% so I will probably sell it sooner than later, as well as APO (up 18%).  I think ARES and OWL still have some upside left and pay decent dividends so I will hold for a while longer.

I am searching for my next investment, which I think I have found.  I identified a VC BDC that’s performance is stellar, 3 year NAV return of over 9%, but trades at roughly 50% discount to its NAV.  At least right now, I can’t see any reason for this BDC to trade so terribly given its strong underlying performance.  More to come!!!