Following the instability of Q1, the results out of Wall Street provide some insight into the outlook for private capital, from credit to transactions.
By Jack Arrowsmith, London
This week saw the Q1 earnings for some of the major Wall Street banks and financial institutions. Reports came in for Goldman Sachs, JPMorgan Chase, Citigroup, Wells Fargo, BlackRock, Bank of America, and Morgan Stanley. The headline figures were strong jumps in earnings, as traders looked to capitalise on market instability brought about by geopolitical shocks.
But with private markets in an increasingly uncertain era, investors were looking for clues on the outlook for the sector.
Some colour on credit
Private credit funds spent Q1 rocked by surging redemptions, as the asset class faced concerns over the underlying strength of portfolios.
BlackRock was one such case. Last month it was forced to cap redemptions from its HPS Corporate Lending Fund (HLEND) at 5%, after they reached around 9% of the fund’s net asset value.
In Q1 it posted private markets inflows of $9bn, driven by private credit and infrastructure. This follows the firm’s acquisition of credit investment manager HPS Investment Partners in the summer of last year, to build out its private credit offering.
Goldman Sachs narrowly missed having to implement a cap for its private credit fund, which reported redemptions of just under 5% in the first quarter. This is likely down to the investor base of the funds: while HLEND does target retail investors, Goldman’s fund is primarily made up of institutions.
BlackRock noted that institutional interest in its private credit products is remaining resilient, and in some cases increasing, due to widening spreads.
In a client note, UBS analyst Michael Brown wrote: “Activity was a bit softer in Q1, partly seasonal and partly due to uncertainty – but that’s also creating new opportunities: direct lending terms are being quoted 25-50 bps wider (and in some cases 100+ bps), providing an attractive opportunity to put money to work.”
Citigroup said that in Q4 2025 it had $22bn of private credit exposure from its loans to non-bank financial institutions (NBFIs), and that 98% of these loans were investment grade.
The bank added that less than 1% of their NBFI loans are to business development companies, which have been particularly under pressure from the stress in private credit. Citi reported zero losses over the life of its portfolio.
Its CFO, Gonzalo Luchetti, argued that the firm’s position was strong during an earnings call, citing a “rigorous” customer selection process and the firm “constantly stress testing” its private credit portfolios.
“We feel very good and comfortable that we are able to navigate a range of environments with the portfolio. And it’s all anchored in the strength of the risk appetite that we’ve built up over time” he said.
Wells Fargo reported $36.2bn in private credit exposure, while JPMorgan CFO Jeremy Barnum put the bank’s exposure at about $50bn. In an earnings call, CEO Jamie Dimon said that he was “not particularly worried” about the state of the private credit market, although he acknowledged that there had been weakening underwriting in the asset class.
“There will be a credit cycle one day…I’d be more worried about when there’s a credit cycle, how is that going to filter through the whole system?” he said, noting the high levels of government debt.
Despite this apparent confidence in their private credit positions, the FT is reporting that Wall Street banks including JPMorgan, Morgan Stanley, and Citi have just begun trading credit default swaps against the flagship private credit funds of Blackstone, Apollo, and Ares, which pay out in the event that these vehicles default on their debt.
The PE transaction pipeline
The earnings posted a strong showing for investment banking fees. At Goldman Sachs they were up 48% versus a year earlier, while JPMorgan’s were up 28%, although it is unclear how much this was driven by wider M&A versus PE transactions.
On the sell side, the volume of global PE exits fell 6.25% year over year in Q1 2026, from 768 to 720, according to S&P Global. While the total value of these exits surged to $311bn, 80% of that was made up of just one deal: the $250bn sale of Elon Musk’s xAI to SpaceX.
Andreas Stender, a senior partner at Kearney who leads the firm’s private equity practice in Europe, told Private Equity Wire® that a gap still exists between manager valuations and the market’s pricing of those assets, although it has reduced.
“I wouldn’t say [transaction activity] is completely back to its former height, but we have a backlog this year which has to be cleared,” he continued, noting that low activity last year led to further compounding of postponed deals, some of which are being completed this quarter.
But clearing the books does not necessarily indicate a strong outlook. Goldman Sachs reported that its backlog of investment banking fees had decreased slightly compared with the end of 2025, meaning it could have been working through past deals without a strong future pipeline being built.
UBS analyst Erika Najarian said in a note that the ultimate performance of Goldman’s stock would in part “be dependent upon management’s outlook on the durability of the IB pipeline”.
And performance is unlikely to be the same across sectors. “We will have winners and losers,” Stender says, with geopolitical instability meaning that certain types of assets are in high demand. “The winners include energy, space, defence, and logistics”.
On the buy side, an FT report citing data from Dealogic put acquisitions as a whole at $172bn for Q1, down 36% from the previous quarter.
With market uncertainty from geopolitics to AI likely to continue, Stender argues that previous shocks have made PE firms more resilient.
“Compared to the outbreak of the Ukraine war, buyers are much more educated on how to handle uncertainty,” he says, noting that investment committees are more cautious and increasingly focused on modelling downside scenarios.
“People are used to more staggered processes”.
