Inside Q1 2026: What the Biggest Alternative Managers Are Talking About
Key Takeaways from 400 Pages of Earnings Transcripts
👋 Hey, Nick here. A big welcome to the new subscribers from Deutsche Credit, Republic Square, and Voya Financial. You’re now part of a select group of 2,971 subscribers. This is the 167th edition of my private credit newsletter. You can read my previous articles here and subscribe here. If you’re reading this on Outlook, I’d recommend you read it online.
Every quarter, I summarise the 400+ pages of earnings transcripts from the largest managers. I do this for two main reasons:
It helps me understand the consensus views.
It brings to light unfiltered and occasionally provocative opinions.
This is the piece I look forward to writing every quarter. If you take away one useful insight, I’d really appreciate it if you could forward this newsletter on.
📚 Quotes of the Quarter
Transcripts can be found here
Provocative Opinions
The Obsession with Levered Lending is a Failure of Imagination
If there was one quote that best captured how large managers feel about recent press coverage, it came from Marc Rowan.
Apollo
The press remains fixated on a $2 trillion slice of this market, which should be called levered lending. Most of the financial press treats this as if it is the entire story of what’s happening in private markets and it is far from it. The investment grade private credit market, which is being driven by the global industrial renaissance, is a $38 trillion market. Therefore, the total opportunity in private credit is some $40 trillion.
The obsession with this very narrow corner of the market, this $2 trillion slice levered lending, is frankly, a failure of imagination. Credit, in any economy, only comes from one of two places. It comes from the banking system or the investment marketplace. There is no third choice.
Does that mean that risk has been transferred to investors? I don’t think so. What has happened in our marketplace and the growth of levered lending, particularly exposure to BDCs, is a rational move by investors who are looking to de-risk. Most of the investors in levered lending have come from the sale of their equity portfolio. Investors rationally have decided that they can earn equity-like returns from first lien risk, rather than by holding equity for a portion of their more speculative exposures.
Private credit is just credit. You underwrite it well and it performs. You underwrite it poorly and it doesn’t.
Don’t Trust the Headlines, Focus on Fundamentals
Managers are united in Marc’s frustration.
KKR
So our suggestion is don’t trust the headlines. Stay focused on the fundamentals and how we are executing. That’s what ultimately matters and how we are spending our time. This approach has served us well for the last 50 years, and we expect will continue to for the next 50.
BlackRock
There has been a lot of attention on private credit, but the headlines do not reflect what clients are telling us, what our portfolio data shows, or where we see the market going. Demand is structural. Private credit serves an important role in the financing ecosystem. Banks, governments, and public capital markets cannot fully address the world’s growth and investment capital needs. That is not changing.
Apollo
Almost all the spread widening we saw take place, took place in the media and did not take place in the market with the exception of below investment grade software and in IG software to some extent, where we did see spread widening, where we just do not have nor do we want meaningful exposure given the diverse set of outcomes that can happen with respect to credit.
BlackRock
Much of the focus has been on wealth vehicles like BDCs, interval funds, and tender funds. These funds make up around $550 billion in AUM — or about 25% — of the $2.2 trillion private credit industry. Institutional demand is actually accelerating.
The Illusion of Liquidity in Fixed Income
Apollo
Fixed income trading capital in the world is now 10% of what it was in 2008, and the market is three times its size. The entirety of the market, whether you are investment grade or below investment grade, is just not that liquid. It just appears liquid on good days. We have already seen wholesale breakdowns in the liquidity of this marketplace during COVID and during UK LDI, and I expect that we will see this again.
BDC Redemptions
The common message was that redemptions are manageable, concentrated, and much smaller than the headlines imply.
Ares Management
If these two funds were to experience 5% quarterly redemptions for a full year, with no gross inflows...It could impact our FPAUM by approximately 1% annually.
Ares Management
The majority of repurchase requests during the most recent quarter came from a limited number of family offices... Over 95% of our investors did not request redemptions.
Blackstone
Contrary to this popular idea that it is small investors leading the charge, it is actually a smaller number of large investors who are double the size, on average, of the typical account in these vehicles. They are the ones — we saw this if you went back to BREIT, and it is the same story here with BCRED. The great mass, by number, of smaller investors tends to stick with the product over a long period of time. It is the bigger boulders, as opposed to the pebbles, where you get more movement in terms of redemptions.
Blue Owl Capital
While the level of debate around private credit has resulted in elevated industry-wide redemption requests, the actual impact to Blue Owl Capital Inc.’s revenues and earnings for the first quarter was quite modest. During the quarter, net outflows of roughly $170 million from OCIC and OTIC were less than six basis points of our beginning-of-period AUM.
BlackRock
Much of the focus has been on wealth vehicles like BDCs, interval funds, and tender funds. These funds make up around $550 billion in AUM — or about 25% — of the $2.2 trillion private credit industry. Institutional demand is actually accelerating.
Blue Owl Capital
For OCIC, redemption requests were concentrated, with 1% of investors representing a majority of tenders, and approximately 90% of the investor base elected not to tender at all. Generally, requests have been more investor-led than adviser-led, highlighting continued strong support from our partners in what we believe has been a headline-driven, not fundamental-driven, redemption environment.
KKR
In total, direct lending is $39 billion or 5% of our AUM. It’s an important business for us, but in the framework of KKR, it’s of modest size. And with a lot of focus on redemption activity in the wealth space, we note the size of our private BDC is even smaller, around $3 billion of AUM or 0.4% of our AUM in total. In terms of our public BDC, FSK is a little less than 2% of our AUM.
Blackstone Says BDC Investors Knew What They Were Buying
Blackstone
What has been more challenging is that some of the social media and press reporting is so different than the facts that we see. When you think about these products, they are sold not directly to individual investors; they are sold through financial advisers who are obviously sophisticated. There is incredible levels of disclosure when we are selling these products. If you look at BCRED, on the cover page, there are six bold highlighted lines talking about the liquidity limitations in the product.
To me, it is not a surprise that we have more than 300,000 customers, and yet, we have not heard complaints from them that they do not understand that they are trading away some liquidity for higher returns.
Blue Owl Says Its Problem Loans Have Recovered 1.1x to 1.2x
Blue Owl Capital
We have gone back and studied all of the cases where we have had restructurings or material amendments driven by performance issues. The actual statistics are: our average principal recovery in those cases has been $0.80 on the dollar. When you incorporate that we actually had several coupons in on average in those instances as well, our actual recoveries in total on our problem situations have been 1.1x to 1.2x.
Ares Says It Has the Most Credit Dry Powder
Ares Management
As one of the largest institutionally backed private credit providers globally, we believe that we have the most credit dry powder of any public player in the market, totaling more than $100 billion.
Why Blackstone Likes Being Capital-Light
Blackstone
Running capital light can be a harder business model — you have to raise money from third parties as opposed to borrowing large amounts of money and earning a spread on that. But we do believe that, given what can happen when the environment changes and what the regulatory climate can look like, being an investment manager gives us the greatest flexibility. Operating a business with virtually no net debt and no insurance liabilities means that if we need to use capital to do something at the firm level, it is available. There is no moment where we are facing any sort of liquidity crisis.
We pay out basically 100% of our earnings between our dividends and our stock purchases. We like this capital-light model. We like being an open-architecture third-party manager for our investors. We think that is the right long-term approach. And particularly when you get to moments of volatility, you are not going to see redemption risk at a firm level. There is no credit risk at a firm level. We think this is an all-weather business model. It is why we have been through a lot of volatility, particularly in the last six years, and Blackstone Inc. keeps powering ahead.
Institutional Investors are Coming Back to Direct Lending
KKR
The shift we’re seeing in the last several weeks has been the institution is kind of coming back to direct lending a bit and saying, okay, I see all these headlines about wealth, that should mean that risk/reward is getting better on new deals. And therefore, I’m going to take a fresh look at it again.
Blackstone Is the World’s Largest Investor in AI Infrastructure
Blackstone
Today, we believe Blackstone has become the largest investor in AI-related infrastructure in the world... Our total portfolio now consists of over $150 billion of data centers globally, including facilities under construction, and it continues to grow rapidly, with an additional $160 billion in prospective pipeline development.
Private Credit Has Contracted Once. Banks Have Contracted Eight Times.
Ares Management
If you look over the last 25 years, U.S. private credit has contracted once, which was over ten years ago, versus the banking sector, which has contracted eight times over the same period.
Consensus Views
Spreads, Pricing & Market Conditions
Ares Management
The current environment is offering wider spreads, higher fees and better terms. With over $150 billion of available capital and a highly diversified platform, we are well positioned to take advantage of these conditions and deploy capital at more attractive risk-adjusted returns.
Oaktree Specialty Lending (OCSL)
We are encouraged that spreads on new private credit investments have widened to SOFR plus 500 to 550 basis points, approximately 50 to 100 basis points above the 2025 tights, and supports improved forward returns. We are also seeing modest improvements in documentation and more lender-friendly structures.
BlackRock
Private credit has historically offered asset-level yields approximately 150 basis points higher than comparable weighted traditional fixed income. New activity levels have been somewhat lower in the first quarter, which is seasonal and reflects market uncertainty. But new, regular-way direct lending is being quoted 25 to 50 basis points wider than where the market was in the fourth quarter, with select opportunities over 100 basis points wider.
ARCC
Spreads on first lien originations in the Q1 increased by approximately 20 basis points quarter-over-quarter, while leverage levels declined by nearly half a turn of EBITDA.
Blue Owl Capital
As Marc mentioned earlier, the market conditions that create volatility in public markets also tend to result in spread widening and a decline in available capital across asset classes. We are beginning to see this in the origination pipeline, with spreads at least 50 basis points wider.
Deployment & Origination
Ares Management
The transaction market environment for U.S. direct lending was slower in the first quarter as industry-wide deal count and middle market M&A declined by 41% in Q1 2026 versus Q1 2025 due to impacts from the Iran war, and changing inflation and rate expectations.
Manager Strategy & Platform Growth
Ares Management
I would remind everyone that Ares experienced its two fastest periods of growth during the GFC and COVID.
Blackstone
Operating a business with virtually no net debt and no insurance liabilities means that if we need to use capital to do something at the firm level, it is available. There is no moment where we are facing any sort of liquidity crisis.
Blue Owl Capital
Direct lending represents only 37% of Blue Owl Capital Inc.’s AUM. To put this in context, real assets is now 27% of AUM, and GP strategic capital is 22%. Nearly three-quarters of equity capital we have raised over the last twelve months has been outside of direct lending.
Ares
We are not changing the playbook. Our model has been the same for decades: originate a broad funnel and apply rigorous diligence and portfolio management to drive returns. Two underappreciated hallmarks: first, selectivity — we typically have a yes rate of about 5% across private credit. Second, incumbency — roughly half of direct lending deployment comes from incumbent portfolio relationships, which makes for easier, higher-conviction underwriting. Those two together have supported our loss rates, which across private credit have been trending close to zero.
Blackstone
In the back half of last year we took two companies public in the U.S., Allegion and Medline. Those stocks are up 160%. So if you bring good companies that have real earnings momentum, the market wants that. So I would say it breaks into different buckets. It is AI beneficiary companies — obviously digital infrastructure, some of the tech companies that are going to go public this year.
Market Risks, Bubble Debate & Big Narrative
Blackstone
BDCs and credit interval funds with redemption features represent less than 10% of the U.S. non-investment-grade credit markets. Meanwhile, the Treasury Secretary, leaders of the Federal Reserve and the SEC, and the heads of numerous financial institutions have now acknowledged they do not see systemic risk from private credit.
Ares Management
While private credit has expanded at low double-digit rates over the past decade, this growth tracks in line with the growth of the $5 trillion private equity sector and other private market asset classes. Also, the percentage of our economy’s GDP funded by corporate credit — including private credit, bank C&I loans, syndicated bank loans and high yield bonds — has not changed over the past decade. This indicates that the growth of private credit is not increasing the amount of leveraged credit in the economy, and is providing more consistent funding throughout business cycles.
Brookfield
We have no software exposure and our credit portfolio is performing incredibly well.
BlackRock
Over the last five to seven years, relatively benign credit markets have lifted all boats. As the overall market environment becomes more complex, we expect to see much more dispersion in performance among private credit managers. That is an environment we like to compete in.
Wealth, Retail & 401(k)s
BlackRock
I have been doing this for 20+ years. We have seen more advancements on private markets in 401(k)s in the last 12 months than in the prior 20 years.
Partnerships & Strategic Alliances
KKR
We are seeing more and more clients wanting to do more with fewer partners is absolutely playing out, especially as they see more dispersion of results. We’re heading towards more of a K-shaped industry.
Returns & Performance
Ares Management
Over the last twelve months, we generated time-weighted returns of approximately 12% to 15% in our U.S. direct lending strategies, 15% in Alternative Credit, 12% in Opportunistic Credit, 9% in European direct lending and over 20% in APAC credit.
Blackstone
At Blackstone Inc., we have generated 9.4% net returns annually in our non-investment-grade private credit strategies since inception nearly twenty years ago — roughly double the return of the leveraged loan market.
BlackRock
HLEND is one of the best-performing non-traded BDCs in the market. It has logged a 10.4% annualized total return since inception. It is one of the only funds among major peers with positive performance in 2026.
Blue Owl Capital
Our direct lending strategy generated gross returns of 8.5% over the last twelve months and, more specifically, our largest nontraded BDC, OCIC, has delivered an attractive 9.1% annualized return over approximately five years since inception.
Blue Owl Capital
In alternative credit, gross returns of 11% over the last twelve months have compared favorably to leveraged loans as well, outperforming by more than 600 basis points.
Apollo
If you look at the 21-year-plus track record there, the return coming out of ARCC has beaten the S&P 500, the syndicated bank loan market, the high-yield bond market, and probably most anything else that people have invested in. It’s a wonderful company and a wonderful structure.
Portfolio Quality, Defaults & Non-Accruals
Ares Management
Across our direct lending portfolios, we are seeing continued near 10% EBITDA growth, loan-to-value ratios in the mid-40% range, private equity funds continue to fund new transactions with a majority in equity, and improving interest coverage ratios of 2.2x.
Ares Management
Non-accrual ratios are well below historical norms, and we are generally financing much larger, more resilient businesses today versus past vintages. The relatively small number of credit issues we see are company-specific rather than indicative of broader trends.
Blackstone
BCRED’s borrowers reported low double-digit EBITDA growth for the most recent twelve-month period, while interest coverage has improved by approximately 40% over the past two years to 2.2x as rates have declined and earnings have grown.
Carlyle
In direct lending, our current nonaccrual rate is only 1%, and our inception-to-date loss rate over 13 years is just 8 basis points per annum.
Blue Owl Capital
Our average annual loss rate remains a very low 12 basis points, an important factor in driving our continued outperformance to leveraged loan and high-yield indices.
Blue Owl Capital
LTVs have picked up modestly, incorporating moves in public comps and broad-based spread widening. As a result, LTVs are, on average, in the low forties across our platform and in the tech lending portfolio, continuing to illustrate meaningful equity cushion below our senior secured positions even in the face of compressed equity market multiples.
Fundraising & Capital Formation
KKR
A real bright spot for us this quarter was in credit where we raised $15 billion across our platform. That momentum was driven by our asset-based finance business, which represents over $90 billion of AUM today.
Ares Management
We are on track for another record year of fundraising as we raised $30 billion of gross capital in Q1, which is our highest ever first quarter and is up 46% compared to last year’s record first quarter.
Blackstone
Inflows reached $69 billion in the first quarter and nearly $250 billion over the last twelve months, reflecting broad-based strength across our fundraising channels. Total assets under management grew 12% year over year to a new record level of more than $1.3 trillion.
Brookfield
We have raised $67 billion of capital so far this year including $21 billion during the quarter.
BlackRock
Clients awarded us with $130 billion of net inflows in the first quarter. That drove 8% organic base fee growth, representing our highest first quarter in the last five years.
Blue Owl Capital
We raised $57 billion of capital over the last twelve months, our second highest capital raise since inception, and $11 billion in the first quarter, which represents approximately 14% annualized on our AUM at the end of 2025.
Carlyle
On inflows, we had a great start to the year, attracting $13 billion of new capital.
KKR
We raised $28 billion of new capital in the quarter with demand really widespread across asset classes and geographies. A real bright spot for us this quarter was in credit where we raised $15 billion across our platform. That momentum was driven by our asset-based finance business, which represents over $90 billion of AUM today.
Investment Grade Private Credit & Insurance Demand
Blackstone
In Q1, our investment-grade private credit platform grew 23% year over year to approximately $130 billion.
Blackstone
Our model generated nearly 180 basis points of excess spread on credits we placed or originated over the last twelve months for our private investment-grade-focused limited partners.
Blackstone
In the insurance channel overall, our open-architecture, multi-client approach continues to resonate, with AUM growing 18% year over year to $280 billion — up fourfold in the past five years.
Brookfield
In April, we closed the acquisition of Just Group, a leading pension risk transfer platform in the U.K. This increased total insurance assets by $40 billion and we are now heading to $200 billion and strengthens our position in one of the world’s most attractive retirement markets.
Infrastructure & Data Centers
Blue Owl Capital
In fact, just a couple of months ago, Amazon announced a $12 billion data center campus with investment from Blue Owl Capital Inc.’s digital infrastructure funds... This marks the fourth data center project above $10 billion announced in less than eighteen months.
KKR
Digital infrastructure remains a massive theme for us. We’ve deployed over $40 billion of capital KKR plus our partners across a variety of digital infrastructure themes have over a 20% gross IRR return to date in terms of that activity for us.
Blackstone
Today, we believe Blackstone has become the largest investor in AI-related infrastructure in the world... Our total portfolio now consists of over $150 billion of data centers globally, including facilities under construction, and it continues to grow rapidly, with an additional $160 billion in prospective pipeline development.
PIK
Oaktree Specialty Lending (OCSL)
OCSL continues to be prudent around the use of payment-in-kind income, with PIK representing approximately 5.5% of adjusted total investment income during the quarter. This is down from 6.3% last quarter due to the sale of athenahealth PIK preferred at our mark.
Saaspocalypse
Blackstone
If you look at our software exposure in BCRED, for instance, the average borrower put up $3 billion of equity. So they have a lot of incentives here to make these investments work.
Oaktree Specialty Lending (OCSL)
Within our performing debt portfolio, 2 investments representing 2.9% of fair value are classified as having high AI risk.
Ares Management
The study graded each company on a spectrum of risk characteristics and concluded that our software-oriented portfolio is very well positioned, with 86% of the portfolio with low risk of potential AI disruption. Approximately 13% of the portfolio was classified as medium risk... and only 1% of the portfolio was categorized as having high risk of AI disruption.
Ares
New software deals are getting done where competitive moats are evident, and spreads reflect market anxiety. We are also using this market to exit select names where conviction is lower, which contributed to the gross-to-net outcome this quarter. More broadly, think about core systems — finance, cybersecurity, order management — firms are not ripping them out; they are layering AI to enhance them, and vendors are doing the same.
Ares Management
We are not seeing any credit deterioration broadly within software, as we have only one software company on non-accrual.
KKR
So just look to level set, software represents around 7% of our AUM. In private equity, it’s a higher percentage. It’s around 15% across our credit platform in total, it’s 5%. And in Global Atlantic, that number is about 2.5% of our AUM.
Blue Owl’s 10x Gain on SpaceX
Blue Owl Capital
Specifically at SpaceX, just as an example, we made about 10x our money on that investment. We have sold about half of it at a $1.25 trillion valuation, still holding about half of it.
Secondaries
Oaktree Specialty Lending
Secondary private transactions, whether through partial or full portfolio sales, will reshape the private credit landscape as certain market participants look to optimize their asset portfolio or satisfy liquidity demands.
Thanks again for reading. Let me know if you find these posts useful or how I can improve it for next quarter.
Share this with your Investor Relations Colleagues.
This newsletter is for education or entertainment purposes only. It should not be taken as investment advice.