Alternatives SteelPath commentary on the midstream energy infrastructure industry
Invesco
April 8, 2026
Private credit Private credit today: Separating fact from fiction
Key takeaways
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We believe private markets aren’t in a bubble. Recent challenges in private markets reflect historically normal dispersion across strategies, we believe that risks exist but do not represent a systemic issue for private markets overall.
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Understanding private credit structures is essential for evergreen funds. Business Development Companies (BDCs) and other vehicles evolve, each with different liquidity profiles and investor considerations.
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Manager selection is critical. Private credit performance can vary significantly across managers, highlighting the potential importance of underwriting quality and strategy discipline in shaping outcomes.
Private credit continues to dominate headlines — and not always for the right reasons. Between concerns about rising defaults, liquidity constraints, and the growth of evergreen vehicles, investors are asking whether the asset class is nearing a breaking point. But a closer look at the data reveals a far more balanced story. Understanding the fundamentals behind private markets is essential to making informed allocation decisions.
Evergreen funds are expected to grow their share over time
Private capital has raised trillions of dollars over the past decade. Evergreen funds, which are a newer type of vehicle with more liquidity than drawdown funds, are only around 14% of total private markets assets under management. Most of these funds to date are institutional ($2.3 trillion), but wealth-focused evergreen funds are expected to continue to grow their share over time, from $500 billion in 2025 to $1.1 trillion in 2029.
Headlines around defaults, such as First Brands or Tricolor, have contributed to a sense of mounting risk. Yet these events reflect idiosyncratic company issues rather than systemic stress, in our opinion. Just as in public credit, there will always be segments of the market experiencing pressure. What matters most is thoughtful strategy selection and manager discipline.
Why investor education matters more than ever
Private credit fundamentals remain broadly healthy. Evergreen funds — which offer more regular liquidity than traditional drawdown funds — make up roughly 14% of private markets AUM and continue to grow.1 Understanding these vehicles — how they are structured, how they generate yield, and how liquidity provisions operate — is crucial. Private markets may offer compelling opportunities but come with unique risks that require careful consideration.
What’s worrying investors? Tech exposure and credit quality
Investor anxiety has recently shifted toward software and technology borrowers, driven by concerns about artificial intelligence (AI) disruption. But both public and private credit markets have exposure to this theme, and software companies represent just one segment of the borrower universe. While pockets of weakness exist, we believe the overall health of private credit suggests that today’s environment is far from distressed.
Manager selection is more critical than ever
Private credit has outperformed its public counterparts across 1-, 5-, and 10-year periods, yet the dispersion of returns across managers is significant. This underscores an important point: not all private assets are created equal. The expertise, underwriting discipline, and risk management approach of a manager can dramatically influence outcomes.
Direct lending total returns vs. public proxy (ended Sept. 2025)
| Trailing index total returns (%) | 1-Y | 5-Y | 10-Y |
|---|---|---|---|
| Private credit: direct lending | 9.8 | 10.7 | 9.1 |
| Broadly syndicated loans | 7.1 | 6.9 | 5.4 |
| Difference (private - public) | +2.7 | +3.8 | +3.7 |
Conclusion
Private credit is neither the bubble some fear nor the flawless engine its most ardent supporters promote, in our opinion. Instead, it is a maturing and increasingly diverse market segment — one that offers meaningful opportunity for investors who take the time to understand its nuances.
For a deeper dive into the data, trends, and analysis behind these insights, [click here to view the full presentation deck].
Related insights
Important information
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Evergreen funds are open-ended investment vehicles that pool capital to invest in private, often illiquid, markets (private equity, debt, real estate) without a fixed termination date.
Draw down funds are investment structures where investors commit a total amount of capital upfront, which is then called upon by fund managers over a predefined, finite period
Cliffwater Direct Lending Index (CDLI): An index measuring performance of U.S. middle-market direct lending funds, based on business development company disclosures.
S&P Leveraged Loan Index: An index tracking the performance of the U.S. broadly syndicated leveraged loan market, consisting mainly of senior secured, floating-rate loans.
MSCI Burgiss Time-Weighted Global Private Debt Index: The MSCI Global Private Debt Index is based on data compiled from historical performance records of various Global Private Debt funds tracked via Burgiss since 1980.
Morningstar U.S. High Yield Bond Category: A Morningstar peer group that includes U.S.-domiciled mutual funds and ETFs primarily investing in below-investment-grade (high yield) corporate bonds, typically rated BB+/Ba1 or lower.
Morningstar U.S. Bank Loans Category: A Morningstar peer group consisting of U.S.-domiciled mutual funds and ETFs that primarily invest in floating-rate, senior secured leveraged loans (also referred to as bank loans) issued by below-investment-grade borrowers
Past performance does not guarantee future results. An investment cannot be made into an index.
The opinions referenced above are those of the author(s) as of April 15, 2026, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations. This information is provided for informational and/or educational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument.
All data provided by Invesco unless otherwise noted.
©2026 Morningstar Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers. It may not be copied or distributed and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
About risk
Many products and services offered in technology related industries are subject to rapid obsolescence, which may lower the value of the issuers in this sector.
Investments in private credit and private debt—including leveraged loans, middle market loans, mezzanine debt, and second liens—are speculative and involve significant risks. These securities are generally illiquid, lack a secondary market, and may need to be held to maturity, which can result in liquidity constraints and difficulty exiting positions. Borrowers often have high leverage, increasing default risk, particularly in adverse economic or interest rate environments. Competitive pressures and excess capital may lead to weaker underwriting standards, raising credit risk and reducing potential recoveries. Private market investments also carry risks related to limited transparency, higher fees and expenses, longer investment horizons, and regulatory considerations. Additionally, these securities may be sold or redeemed at values different from the original investment amount and are considered to have speculative characteristics similar to high-yield securities. Issuers are more vulnerable to changes in economic conditions than higher-grade issuers, and investors may face liquidity strain from capital calls during periods of market stress. These factors can materially impact investment performance and principal value.
Direct lending involves providing loans to private companies, often without the same level of transparency or regulatory oversight as public markets. Borrowers may experience financial distress or default on their obligations, leading to potential loss of principal and interest for investors. Additionally, these loans are typically illiquid, making it difficult to exit positions quickly, especially during adverse market conditions.
Broadly syndicated loans involve significant risks. These loans are typically made to highly leveraged corporate borrowers, increasing the likelihood of financial distress or default, which may result in loss of principal and interest. The secondary market for these loans can be illiquid, particularly during periods of volatility, limiting the ability to sell positions at favorable prices. Although most loans bear floating interest rates, changes in benchmark rates can affect returns. Additionally, covenant-lite structures or reduced lender protections may further increase risk if borrower credit quality deteriorates.
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