Let's Wrap-up 2025
š Hey, Nick here. A big welcome to the new subscribers from Ares, Carlyle and Newmarket Capital. This is the 145th edition of my weekly newsletter. If someone forwarded this to you, you can subscribe here and read my previous articles here.
This weekās a wrap-up of 2025. Unfortunately, some managers took the āwrapā theme a little too literally, so Iāve posted their music videos for your amusement.
If we donāt speak before the New Year, Happy Holidays, and thank you for subscribing.
I hope youāve enjoyed this year of Credit Crunch as much as I did.
Looking forward to 2026.
Nick
š The Holiday Videos are Back
Blackstoneās Holiday Video
Apolloās Holiday Video
š The Crowdās Narrative for 2025
Spreads are tight (donāt worry, we still have a premium to liquid credit)
Defaults are within historical norms (Can we stop treating one messy credit as proof the whole marketās broken?)
M&A is coming back (Weāre told M&A helps spreads. Weāre choosing to be emotionally available to that idea.)
Weāre partnering with banks, insurers, and traditional asset managers more than ever (The good news: we have capital. The bad news: everyone else has it too.)
Commercial Real Estate lending is back (Weāre even financing the banks so they can go back to the office.)
ABF is š (New entrants are underwriting vibes, particularly in consumer and factoring.)
AI is š (We hope we wonāt be holding the keys if thereās any overbuild. š¤)
Weāre growing in Europe (And possibly Asia, depending on how many flights we take and how many deals survive IC.)
š More Than the Talking Points
Weāve lived through generally good times in the last 16 years. The coming period is likely to be more āinteresting,ā as errors that were made in those good times come to light.
Recent credit events have probably chastened lenders and investors, putting them on alert. Thus, theyāre likely to incorporate a re-elevated level of prudence in their decisions in the coming months and perhaps yearsā¦
Thereās nothing wrong with the plumbing.
Howard Marks (Read here)
US M.A is Showing Signs of a Revival
š [Read Oaktreeās December letter here]
Deepening Dispersion
BlackRock sees widening dispersion within private credit, particularly in the lower mid-market.
They showed the same graph last year.
š [Read BlackRockās Outlook here]
HPS has āindependentlyā arrived at the same opinion
We see the most pressure within smaller companies, which we believe have a limited margin for error navigating macroeconomic shocks. Companies with less than $25 million of EBITDA are experiencing meaningfully higher covenant defaults, compared to companies at the upper end of the market, reinforcing our view that experienced private credit managers with scale that invest in larger companies are best positioned during challenging macroeconomic environments.
š [Read HPSās Thoughts on Private Credit]
BDCs Underperformed in 2025
The underperformance got more airtime than it deserved.
š [Read Raymond Jamesā December Update Here]
Moderate LTVs Still Provide Meaningful Protection
During the 2008-2009 GFC, the Cambridge Associates Private Equity Index experienced a 28% peak-to-trough valuation decline.
Blue Owl highlights that its loans are generally senior with a weighted average loan-to-value of 39%.
Borrowers would therefore need to lose more than 60% of their value before Blue Owl experiences potential principal loss.
š [Read Blue Owlās Update Here]
Private Credit Still Matches the Opportunity
Private credit dry powder relative to private equity dry powder has remained almost unchanged over the last ten years
Underscoring the thesis that the marketās scale remains proportionate to its opportunity set.
š [Read HPSās Thoughts on Private Credit]
Banks Are Powering Private Markets
Loans to non-deposit financial institutions have increased 3x since 2020.
š [Read Wellingtonās Outlook]
New Entrants Need Not Apply
Five years ago, the top 20 managers raised 35% of the capital in the market; in 2024, the top 20 private credit managers raised more than 65% of the capital.
Fundraising data shows a similar trend, with new entrants accounting for just 2% of the total fundraising share in 2024.4
š [Read Barings Insights]
And the last one, because whatās a summary without mentioning AI.
š [Read Partnerās Group Outlook here]
š°Fundraising News
Deerpath Capital, a U.S.-based lender, raised $3.5 billion for its Deerpath Fund VII fund. The fund lends to sponsored U.S. lower middle market companies.Since its inception in 2007, Deerpath has invested more than $14 billion across over 1,200 transactions. More here
Colesco Capital, a Netherlands-based private credit specialist, has agreed with Polestar Capital and its investors to take over management of the Polestar Capital Circular Debt Fund. The fund focuses on financing the transition towards a more circular economy. The entire investment team will transfer to Colesco, maintaining continuity in the execution of the strategy. More here
HSBC Asset Management has launched a new fund for retail investors in Hong Kong. The fund will invest in both public and private credit globally and will offer investors monthly payouts. It will focus on short-duration institutional-grade private credit and asset-backed opportunities. More here
This newsletter is for educational and entertainment purposes only. It should not be taken as investment advice.