Private Credit's Role Holds Firm Despite BDC Volatility
- 3 hours ago
- 3 min read
What's New
Goldman Sachs' recent Private Credit Monitor report, led by credit strategist Amanda Lynam, argues that despite headline noise around retail BDC redemptions, private credit's structural role in the financing ecosystem remains intact. The report frames the asset class as still modestly sized relative to private equity, bank lending, and syndicated markets, with significant runway for expansion given the vast universe of privately held firms generating nearly $12 trillion in annual revenue.
Why It Matters The report arrives at a moment when market participants are questioning whether recent BDC related volatility signals deeper cracks in private credit. Goldman's answer is a definitive no. Retail BDCs represent a small slice of total private credit AUM, and the institutional capital base driving the asset class continues to grow. For allocators and lenders navigating this market, the takeaway is that the structural tailwinds (larger deal sizes, fundraising consolidation, and growing fluidity with syndicated markets) outweigh the near term noise.
Big Picture Drivers
Addressable market: 63% of US firms with $100M+ revenue are private, and the EU/UK skew even higher, representing a massive lending opportunity.
Syndicated market displacement: Average USD high yield deal sizes hit $791M from 2022 to 2025, pushing smaller borrowers toward private credit solutions that fill a financing void.
Manager consolidation: Experienced managers (four or more funds) captured 83% of global private debt fundraising from 2022 to 2025, while first time managers raised just 4%.
Jumbo deal growth: Private credit loans of $1B+ have surged, enabling lenders to serve larger borrowers who historically accessed syndicated markets exclusively.
Financing continuum: Two way refinancing flow between direct lending and broadly syndicated loans has become a defining feature, with 97 private market "steals" totaling $139B since late 2021.
By The Numbers
$1.7T: Approximate global private credit AUM (traditional definition), versus $10.5T for private equity.
64bp: CDLI realized losses for full year 2025, well below the since inception average of 100bp.
87%: Share of CDLI loans that are senior secured today, up significantly from the pre GFC era.
14%: Share of US direct lending deals that were cov lite in 2025, compared to 92% for the USD Leveraged Loan Index.
158bp: Average spread differential between direct lending and broadly syndicated leveraged loans in 2024 to 2025, down from 215bp in 2022 to 2023.
Key Trends to Watch
Credit quality resilience: PIK activity, non accrual rates, and realized losses all remained range bound through year end 2025, but the macro growth backdrop is the key variable that could change this trajectory.
Software sector concentration: Both private credit and leveraged loans carry heavy Technology/Software weightings, meaning any AI related disruption would hit both markets simultaneously rather than isolating private credit.
Strategy broadening: Distressed, special situations, and mezzanine fundraising could accelerate if sustained dislocations emerge in syndicated markets, reverting closer to historical norms.
Bank interconnectedness: While NDFI lending by US banks has grown, private credit related exposure (business credit intermediaries) represents only about 25% of that category, and Fed analysis shows these loans carry lower default and delinquency rates than other NDFI lending.
The Wrap
Goldman's framing is clear: private credit is not a bubble waiting to pop but an increasingly mature financing channel with structural advantages in customization, certainty, and flexibility. The real risk to watch is not BDC redemptions or covenant erosion. It is the macro growth environment. A deterioration there would test the low loss rates the asset class has enjoyed, but it would simultaneously create the deployment opportunities (via dry powder and syndicated market dislocation) that private credit is uniquely positioned to capture.
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