Key facts
- U.S. private credit portfolio values fell further below reported cost in the first half of 2026.
- Investments by 44 U.S. business development companies (BDCs) had a fair value of $92.88 billion on June 30, against a reported cost of $95.19 billion.
- Stress among borrowers, particularly in the software sector, contributed to the markdown.
- Blackstone's Private Credit Fund (BCRED) received repurchase requests totaling approximately $4.3 billion in Q3, similar to Q2.
- BCRED will repurchase shares up to its quarterly limit of 5% of net asset value.
- Global private credit fundraising rebounded in Q2, with institutional funds dominating.
U.S. private credit portfolio values continued to decline below their reported cost in the first half of 2026, a trend attributed to widening market spreads and increasing stress among certain borrowers, particularly within the software sector. An analysis of regulatory filings from 44 U.S. business development companies (BDCs) revealed that their investments held a combined fair value of $92.88 billion as of June 30, compared to a reported cost of $95.19 billion. This marks a continuation of a trend observed in late 2025, when fair value stood at $95.82 billion against a cost of $96.54 billion, indicating that BDCs are revaluing a greater number of loans. While broad markdowns were more prevalent in the first quarter, losses in the second quarter were concentrated among a smaller group of borrowers.
Anant Kumar, a global investment strategist at Benefit Street Partners, noted that while the aggregate markdown is modest, dispersion is the key issue. He explained that over-leveraged software and services businesses with significant AI exposure are driving the widening, while the majority of the portfolio remains close to par. The critical question for the latter half of the year, according to Kumar, is whether this tail of underperforming loans will continue to grow.
Meanwhile, Blackstone's flagship private credit fund, the $77.2 billion Blackstone Private Credit Fund (BCRED), has experienced redemption requests equivalent to approximately 10% of its outstanding shares in the third quarter, a figure largely unchanged from the preceding quarter. These requests, totaling about $4.3 billion, are largely composed of investors resubmitting orders that were not fully met previously. BCRED intends to repurchase shares up to its quarterly limit of 5% of its net asset value. The fund fulfilled about half of the prior quarter's requests, leaving approximately $2.3 billion unfulfilled, a significant portion of which has been resubmitted for redemption in the current quarter. This carry-over complicates assessments of redemption pressure.
Analysts from TD Cowen estimate that the backlog accounts for roughly half of the third-quarter requests, suggesting that new redemption requests have halved since the second quarter. RBC Capital Markets also views the second quarter as the probable peak for redemption demand at non-traded BDCs. BCRED has seen net outflows of about 3% of its net asset value (NAV) in the third quarter so far, partially offset by subscriptions amounting to roughly 2% of NAV, totaling nearly $750 million in new capital. Outflows from other wealth-focused vehicles are also showing signs of moderation, with the Cliffwater Corporate Lending Fund reporting a slight decrease in requests to 16% of NAV from 17%.
This sustained pressure in wealth-focused private credit vehicles contrasts with a recovery in institutional fundraising. Goldman Sachs reported that global private credit fundraising rebounded in the second quarter, with institutional funds now representing over 85% of private credit assets under management. Through August 25, global private credit fundraising for the third quarter totaled $33 billion, indicating the period is on track to meet or exceed the $45 billion raised in the same period last year.