STEPHAN HARTZENBERG | Swings, roundabouts and private credit

After years of rapid growth, strong fundraising and increasingly prominent allocations in institutional portfolios, private credit is attracting more sceptical eyes. Defaults are edging up. Covenant structures are being tested. Liquidity, always a quiet footnote in the good years, is back in the spotlight.

The term “gating” ― in which funds limit or delay investor withdrawals to protect portfolios from forced selling ― has entered the regular media lexicon, a reminder that liquidity in private markets is managed, not guaranteed.

The questions are familiar, even predictable at this stage of the cycle. Has underwriting been too loose? Are investors properly compensated for the risks they are taking? And, perhaps most pointedly, is private credit finally being stress-tested at scale?

Spend time at the coalface of fund management and it is easy to feel that something structural is shifting. When you are deep in portfolios, managing investor expectations as individual positions come under pressure, every issue feels immediate and material. Patterns are hard to see when you are living inside the detail. But step back, and the picture begins to look different.

From the vantage point of a multijurisdictional fund services provider working across managers, strategies and geographies, what is unfolding in private credit looks less like a rupture and more like a recalibration. Not the unravelling of an asset class, but its first meaningful test.

This distinction matters. Private credit, by its nature, is not designed to avoid stress. It is designed to price it, structure it and, ultimately, be compensated for it. Periods like this are not anomalies; they are part of the cycle. The real question is not whether stress is emerging, but how it is distributed and how different managers and structures respond.

This is where perspective becomes invaluable. At the deal level, challenges often look systemic. A borrower under pressure, a covenant renegotiated, a delayed repayment ― each demands attention and action. Viewed across multiple portfolios, jurisdictions and vintages, a more nuanced story emerges.

What appears to be a market-wide concern may, in fact, be a dispersion story: stronger managers with disciplined underwriting holding up well, while weaker structures begin to show strain. At the coalface, every problem feels like a trend. From a distance, not all of them are.

A partner operating across the ecosystem is uniquely positioned to make that distinction. Seeing multiple managers at once, across different regions and regulatory environments, allows for a form of pattern recognition that is difficult to achieve from within a single portfolio. Distance is not detachment; it is clarity.

Something else that tends to be obscured in more reactive moments is that periods of stress are not just about risk but also about opportunity. As conditions tighten, spreads adjust, structures become more robust and discipline returns to underwriting, capital becomes more selective. Managers with experience, strong processes and the right partnerships can take advantage of the environment.

A headwind for some becomes a tailwind for others. For those structuring and supporting funds across jurisdictions, these shifts often reinforce the value of getting the foundations right from the outset, from vehicle design and regulatory alignment to operational robustness and investor reporting. The present moment is not simply a test of private credit as an asset class; it is a test of how well it has been built.

In complex, fast-moving markets, the most valuable partner is not the one closest to the action, but the one who can step back and interpret it. To separate signal from noise. To recognise the difference between a cycle playing out and a structure breaking down.

Private credit may be under pressure. But with the right perspective, it is also doing exactly what it was designed to do.

• Hartzenberg is group director of global fund services provider PIM Capital Group.