Private credit: Performance vs. liquidity

In this episode of J.P. Morgan's Making Sense, Steve Dulac, co-head of Global Fundamental Research, hosts Jake Pollock, head of North American Credit Trading and Global Credit Financing, to explore the current state of the private credit market. The discussion centers on two key themes: investor liquidity concerns driven by retail vehicles offering 5% quarterly redemption, and the performance outlook amid rising default risks, particularly in software and services sectors vulnerable to AI disruption. While liquidity issues have sparked headlines, Pollock emphasizes that only 15% of direct lending AUM is in retail vehicles, with the bulk held by long-term institutional investors. The conversation highlights that default rates remain low but are expected to rise due to mean reversion and sector-specific risks, especially around high-multiple software loans maturing between 2028 and 2029. The podcast also examines how private credit spreads are widening to reflect these risks, and how JPMorgan’s marking rights and proactive risk management have historically supported stability during market dislocations. Despite near-term stress, both hosts affirm that private credit remains a resilient and essential part of the credit ecosystem, with stronger managers likely to gain share as weaker players exit.