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Private Credit Risk Assessment
Comparison of market variables identified by Diameter Capital
Primary Sources
Diameter's Scott Goodwin says some private credit portfolios are ...
Scott Goodwin founded $30 billion credit-focused manager, Diameter Capital. FII 2026-05-12T19:24:45.999Z Scott Goodwin, the founder of $30 billion Diameter Capital, spoke Tuesday at the Sohn conference. Goodwin has been a critic of private credit funds that are overly exposed to software. He identified three areas where his firm is investing to capitalize on some funds' pain. Diameter Capital founder Scott Goodwin opened his Sohn conference presentation Tuesday with a blunt assessment of private credit. Goodwin, whose firm manages $30 billion and invests across different credit opportunities, has been critical of private credit managers that have loaded up on loans to asset-light companies exposed to disruption from artificial intelligence. In a letter to investors from earlier this year, he predicted a "reckoning" in the private credit space.Tuesday's presentation went further, as Goodwin said the portfolio construction of private credit portfolios overly exposed to sectors like software is "almost criminal."After years of rapid growth in private credit, concerns over credit quality and about how AI could disrupt software have driven record-high investor redemption requests at some of the biggest funds."A lot of things were missed, but mostly the pace of technology change," he said. The most "acute" problems will emerge from private credit funds raised in 2021 and 2022, when software valuations were near their peak, and growth in the asset class pushed managers to seek out bigger and bigger deals."You cannot have 40, 50, 60% of your portfolio in a single sector," he said. Now, there are opportunities for managers like himself. Diameter's analysis found that between $150 billion and $200 billion of loans from private credit funds in need of liquidity will be sold on the secondary market in the coming years. The firm has already done 15 of these deals over the last two months, Goodwin said, including picking up some loans to companies that Diameter was already lending to.The sell-off in publicly traded BDCs has left some portfolios with strong underlying holdings undervalued, and Diameter expects to scoop up some of them at the right price, Goodwin said. And the pullback in direct lending over the coming years should allow firms with staying power the ability to negotiate better terms with companies in need of capital."This is not a systemic issue," Goodwin said about the credit markets as a whole, but new funds need to "know the names" of companies t...
At the Global Conference: Private Credit Leaders Defend Beleaguered ...
Private credit heavyweights want to put the $3-billion industry’s recent woes in the rearview. At the Milken Institute’s 29th annual Global Conference, investment fund managers, executives and advisers defended the hot-topic sector, which has faced a barrage of scrutiny since late last year. Investor concerns over borrower creditworthiness, weak underwriting standards and the threat of artificial intelligence to software loan performance gave private credit a steep hill of a public relations’ problem to climb. Despite a fresh, alarm-sounding study from the Financial Stability Board warning of private credit’s vulnerabilities, opaque valuation practices and interconnectedness with broader financial markets, conference panelists representing direct lending giants maintained the sector is on solid ground. “I’m just not seeing that there’s a systemic problem here behind this,” said Molly Duffy, global head of financial sponsors coverage for London-based Standard Chartered Bank. For Duffy and others, the 2008 financial crash – driven by loose lending and cheap credit – served as a key point of comparison. “There’s a big difference between what you saw in the financial crisis – you had a lot of concentration, and I think there’s many more players now,” Duffy said. “It’s much more distributed in terms of the risk.” So far, private credit defaults have stayed low, even among the software-as-a-service companies that attracted aggressive, high-leverage lending ahead of the widespread launch of the generative AI tools now rocking the sector. “There have been lending practices in direct lending and private credit that were more egregious than in other areas,” said Brad Rogoff, Barclays’ global head of research, noting that lenders’ exposure to software is a “problem.” Investor outflows Spooked by market volatility and artificial intelligence-driven uncertainty, the retail investors that once flooded into private credit vehicles raced to withdraw at record volume, only to be blocked by funds’ redemption caps. Investors expected funds to be more liquid than they are, creating an asset-liability mismatch – but the issue is “clearly not systemic,” Rogoff said. Tweaking how direct lending is presented to retail investors can weed out distrust and confusion, panelists agreed. Their suggested first step? Doing away with the misleading “semi-liquid” moniker used to describe the funds that attracted a boom of individual investors, many of whom overestimated how easy it would b...
Global finance watchdog warns over private credit industry fuelling AI ...
A new report on private credit by the global watchdog, which monitors financial authorities including central banks in 24 countries, found that the healthcare, services, and tech sectors have ...
Blackstone, BlackRock cut value of their private credit funds
Asset managers Blackstone and BlackRock cut the value of their private credit funds in the first quarter, they said on Thursday, citing markdowns on troubled loans to companies in software and ...
