A private credit vehicle managed by New Mountain Capital is highlighting early gains from a dislocation-driven investment strategy, after purchasing discounted loans in the secondary market and seeing rapid mark-ups in value, according to a report by Bloomberg.
New Mountain Finance Corp, a listed business development company (BDC), told investors that a recently acquired loan bought at approximately 65 cents on the dollar has already appreciated by around 10 points within weeks. The firm has been selectively acquiring oversold credit assets following a broader market pullback.
The strategy follows a notable portfolio repositioning earlier this year, when the $2.3bn BDC sold roughly $477m of assets at a modest discount, freeing up capital to redeploy into distressed or mis-priced opportunities. Management indicated that market volatility has created entry points in the secondary market for credits viewed as fundamentally sound.
The approach comes amid shifting dynamics in private credit, where concerns around underwriting standards, exposure to AI-disrupted sectors and tighter spreads have weighed on sentiment. Periods of stress have also triggered elevated redemption requests across non-traded funds and pushed some listed vehicles to trade below net asset value.
Despite these headwinds, recent earnings updates across the sector have been more resilient than anticipated, supporting opportunistic strategies such as secondary loan purchases.
During the first quarter, New Mountain Finance increased the average yield on its portfolio to approximately 11.1%, up from 10.5% in the prior quarter, reflecting both higher-return opportunities and portfolio rotation.
The BDC also repurchased around $57 ofm its own shares, signalling confidence in valuation, while modestly marking down its net asset value per share. Two investments were placed on non-accrual status during the period, illustrating the selective credit stress still present in parts of the market.
