Private credit – part 2

In the previous issue of N&I, we featured a financial advisor who shared their insights on private credit as a potentially solid, low-risk addition to an existing investment portfolio. Unfortunately, private credit isn’t always in the news for positive reasons. Below is a article (Dutch only) by Martin Crum of iex.nl. The article is reproduced below.

Private credit issues are also affecting European banks and insurers

The private credit sector is struggling with investors demanding massive capital withdrawals. This is not a distant concern for investors in banks and insurers, as those companies also have exposure to private credit.

Martin Crum on Wednesday, March 11, 2026.

It remains the center of attention: private credit, essentially non-banks providing banking services—more specifically, the granting of loans. We have covered this topic several times before, including here. 

Private credit has become a hot-button issue among investors. They are currently demanding the return of their capital invested in private credit. This typically involves BDCs, or Business Development Companies, which are specially established closed-end investment funds. 

Source: Bloomberg 

Investors are withdrawing their capital on a large scale 

In and of itself, the withdrawal of capital is not a problem, provided it does not happen on a massive scale. However, that is currently the case. Fears of default, particularly in the software sector—which in turn are fueled by the potential impact of artificial intelligence on this sector—are prompting investors to demand the return of their capital (“redemptions”). 

Redemptions of approximately 5% per quarter were and are typically factored in. That is also the lower limit used by the SEC. Now that fears among investors have grown that a portion of the loans issued may not be repaid, many are choosing to preempt potential defaults.

As a result, firms such as Blue Owl Capital, Blackstone, and BlackRock have run into trouble with their BDCs. Much more capital was redeemed than was available. This is largely a liquidity issue. After all, the leveraged loans are barely, if at all, saleable or tradable, meaning that sufficient capital could not be freed up quickly enough to meet the many redemptions. 

Source: Bloomberg  

Private credit sector takes a hit 

Not all funds are created equal: the three BDC providers mentioned above have all responded in completely different ways to the (excessively) high redemption requests; I’ll likely discuss this in more detail another time. 

Viewed more broadly, however, the entire private credit sector is now teetering. Reports that investors cannot immediately recover all their capital are spreading like wildfire on social media, causing more investors to err on the side of caution.  

This makes it an increasingly greater challenge for BDC providers to facilitate investors who are exiting. An additional problem is that when loans must be sold due to high redemptions, it is often precisely the highest-quality loans that are sold; simply because those are still the easiest to resell privately.

This means that investors who do remain in these BDCs are left holding investments in lower-quality loans. And once that realization sets in, there will naturally come a point where the managers of the BDCs can no longer hold things together.

The situation at CVC Capital is fundamentally different

In this context, it is worth emphasizing once again that while CVC Capital does indeed have fairly substantial private credit activities, it is not hampered by the redemption phenomenon. After all, investors who have concerns about this—whether justified or not—can simply sell their CVC Capital shares. There is therefore no question of redemptions. 

Of course, CVC Capital also faces the risk of default on the loans it has extended, but its track record to date is rock-solid, and the loans it has extended are primarily in Europe.

No New ‘Lehman’

Banks and insurers have exposure to private credit, for example through the provision of loans, credit facilities, and direct investments in private credit firms. This includes U.S. banking giants such as JPMorgan Chase, but also the usual suspects like Deutsche Bank, BNP Paribas, and ING Group. Among insurers, this affects Allianz, AXA, and Aegon, among others. 

Investors must therefore realize that concerns surrounding private equity are not limited solely to the U.S. The exact exposure is difficult to determine, but analyses by UBS, Moody’s, and the European Banking Authority (EBA), among others, show that it stands at around 9% to 10% for European banks and above 10% for European insurers.

However, fears that problems in private credit could lead to a new “Lehman Brothers moment” appear to be exaggerated. The capital buffers of most banks and insurers—certainly in the Netherlands—are robust enough, and the size of the private credit market relative to the total capital market is relatively limited.

However, the situation could lead to higher provisions for bad loans. Furthermore, the impact depends heavily on geopolitical developments and on the extent to which fears of defaults on outstanding private credit loans increase due to the rise of artificial intelligence.

Disclaimer: Crum does not hold any positions in the funds mentioned above.

This article should not be construed as professional investment advice. For more information, please see the full disclaimer. Do you have a question for the author regarding this article? Please send an email to analistenteam@iexmedia.nl.

Sources: iex.nl, Bloomberg, Diana Parkhouse