Global private credit assets under management increased 17% year-on-year to $4.1tn in 2025, with signs of credit deterioration remaining concentrated in specific sectors rather than across the wider market, according to research from the Alternative Credit Council (ACC) reported by Bloomberg.
The industry body argued that negative investor sentiment had become disconnected from underlying market conditions, despite rising concerns over borrower defaults, redemption pressures and the potential disruption of software businesses by artificial intelligence.
The report found that lenders were responding to potential AI-related risks by demanding stronger loan covenants, higher spreads and, in some cases, refusing to extend maturities for vulnerable borrowers.
Michael Small, a partner at KKR, reportedly suggested that professional services businesses could face greater disruption from agentic AI than some software companies, where lenders have concentrated much of their attention.
The research nevertheless identified pockets of credit stress, with approximately one-sixth of surveyed funds reporting non-accrual rates above 5%, indicating that interest income was no longer being recognised on a proportion of their loans due to repayment concerns.
Kevin Marchetti, chief investment officer and head of US direct lending at Man Group, reportedly said approximately 70% of lender takeovers were linked to transactions completed in 2021 and 2022, when low interest rates supported elevated acquisition valuations.
Other indicators showed improvement, with the average proportion of loans subject to significant amendments declining to 10.6%, from 11.7% in 2024.
Such amendments included payment holidays, maturity extensions, covenant changes and the introduction of payment-in-kind interest arrangements.
The findings come as private credit managers face growing scrutiny over portfolio valuations and liquidity, particularly among business development companies experiencing elevated investor withdrawals.
