Private Credit’s Real Crisis Is The Coverage

Private credit carries risks. Of course it does. Some borrowers will fail. Some managers will underwrite bad deals. Some products sold to retail investors will prove a poor fit. The question is whether retail investors are being warned about those risks with discipline and context or frightened into abandoning the managers best equipped to navigate them.

I spent more than 25 years in restructuring and distressed investing. That experience has made the recent retail flight from the asset class look less like a rational reassessment of private credit than a reaction to the story being told about it.

The divergence is stark. Large pension systems are not stampeding for the exits. Arizona’s Public Safety Personnel Retirement System has roughly 17% of its assets in private credit and is targeting 20%. The California State Teachers’ Retirement System (CalSTRS) says it remains committed to its long-term investment strategy, including private credit. Meanwhile, new retail money flowing