As private credit continues to evolve within institutional and ultra-high-net-worth portfolios, investors are increasingly focused on understanding how current market dynamics may influence risk, return dispersion, and manager selection.
In our recent fireside chat, David Golub, President of Golub Capital, joined Alan Zafran, Founder and Managing Partner at IEQ Capital, for a discussion on the state of the private credit market. The conversation explored how the asset class has developed in recent years, key structural considerations, and how investors may evaluate private credit within a broader portfolio context.
Framing Today’s Private Credit Environment
The discussion began with a review of the current market backdrop, shaped by a combination of cyclical and structural factors.
The speakers discussed several headwinds influencing the asset class, including changes in base rates, spread dynamics, evolving credit conditions, and shifts in investor sentiment. These factors have contributed to a more complex environment relative to prior years, where both return profiles and risk considerations have evolved.
At the same time, the conversation highlighted that private credit remains a highly fragmented and manager-driven asset class, where outcomes may vary meaningfully across strategies and platforms.
Dispersion and Manager Differentiation
A central theme throughout the discussion was the increasing dispersion of outcomes across private credit managers.
As market conditions have shifted, differences in underwriting discipline, sourcing capabilities, and portfolio construction have become more visible. The speakers noted that performance variation across managers has widened, reinforcing the importance of evaluating how individual platforms originate, structure, and monitor investments.
This dynamic reflects the degree to which private credit outcomes may be influenced by manager-specific factors rather than broad asset class trends alone.
Sector Exposure and Technological Change
Sector exposure, particularly within software, was another area of focus.
The discussion highlighted that disruption risk related to artificial intelligence may vary significantly across different types of software businesses. Companies serving as mission-critical systems of record, with embedded workflows and higher switching costs, may exhibit different risk characteristics compared to more commoditized or content-driven models.
This distinction underscores the importance of evaluating sector exposure with a differentiated lens, particularly as technological developments continue to evolve.
Market Dynamics and Capital Deployment
The speakers also discussed how current market conditions may be influencing capital deployment and competitive dynamics.
Changes in lender participation, combined with evolving pricing conditions, have contributed to a more selective environment for new originations. In this context, underwriting standards, deal structuring, and sponsor relationships may play an increasingly important role in shaping outcomes.
Participants noted that these dynamics may vary across segments of the market, further emphasizing the importance of strategy selection and manager-specific analysis.
Conclusion
The discussion provided a perspective on a private credit market that is navigating both cyclical adjustments and longer-term structural changes.
As dispersion across managers increases and structural considerations become more visible, the conversation emphasized the importance of disciplined evaluation, thoughtful portfolio integration, and an understanding of how different strategies may behave across market environments.
For investors, this underscores the role of manager selection, underwriting discipline, and structural awareness when considering private credit within a broader portfolio context.
The views and opinions expressed by David Golub, President of Golub Capital, during this fireside chat are his own and do not necessarily reflect the views, opinions, investment strategies, or recommendations of IEQ Capital, LLC (“IEQ Capital”) or any of its affiliates, officers, directors, or employees. Mr. Golub’s participation in this discussion should not be construed as an endorsement by IEQ Capital of Golub Capital.
This document is for informational purposes only and is intended exclusively for the use of the persons to whom it is delivered and the information provided therein is confidential and may not be reproduced in its entirety or in part, or redistributed to any party in any form, without the prior written consent of IEQ Capital, LLC (“IEQ” or “IEQ Capital”). Information contained in this document is current only as of the date specified in the document, regardless of the time of delivery or of any investment, and IEQ does not undertake any duty to update the information set forth herein. The information contained in this document does not constitute an offer to sell or the solicitation of an offer to purchase or sell any securities, including any securities or alternative investments recommended by IEQ. Regarding alternative investments, any such offer or solicitation may be made only by means of the delivery of a confidential private offering memorandum which will contain material information not included herein regarding, among other things, information with respect to risks and potential conflicts of interest. No representation is made that any client will or is likely to achieve its objectives, that IEQ Capital’s strategies, investment process or risk management will be successful, or that any client will or is likely to achieve results comparable to any shown or will make any profit or will not suffer losses or loss of principal. Investing involves risks. You should not construe the contents of this document as legal, tax, investment or other advice. Any tax-related decisions should be made after conducting such investigations as the investor deems necessary and consulting the investor’s own legal, accounting and tax advisers to make an independent determination of the suitability and consequences of a composite election
IEQ Capital, LLC has a business relationship with Golub Capital. This relationship creates a conflict of interest for IEQ. To mitigate such conflicts of interest, all alternative private investment funds must satisfy the due diligence guidelines and requirements as established by IEQ in order to be approved for client investment.
Risk Factors
Credit – Senior Secured RE Lending
- Credit Risk. Private loans are usually unrated or below investment grade, and may be more susceptible to default.
- Competitive Risk. Real Estate Lending is a crowded space with lenders competing on price and weaker covenants.
- Liquidity Risk. There is no guarantee that any Fund liquidity mechanisms will be reliable, and the managers are under no obligation to provide liquidity.
- Mark to Market Risk. Certain portfolios may own liquid loans or mark to liquid markets, resulting in fun volatility.
- Tax Risk. Lending is generally tax-inefficient and post-tax returns may be materially lower than pre-tax returns.
Credit – Distressed
- Macro Risk. The ability to source transactions is contingent on the level of stress in the overall market. Low levels of economic stress may delay deployment, while higher than expected levels of stress may cause existing positions to underperform.
- Credit Risk. Distressed companies are usually not rated or well below investment grade, and may be already in default and at risk of bankruptcy.
- Execution Risk. Turning around a distressed company requires significant expertise and is an intensive process, creating elevated execution risk.
- Liquidity Risk. There is no guarantee that any fund’s liquidity mechanisms will be reliable, and the managers are under no obligation to provide liquidity. Distressed credit is usually highly illiquid until it has been turned around.