Private Credit and The Test of Repayment
Investors want their money back. Closer scrutiny is revealing more reasons for concern.
Private credit means loans made outside traditional bank lending, often by investment funds. Many rarely trade, so their reported values depend on estimates. The question I keep asking is simple: how much of that value will turn into cash? [1]
This year, several large funds have faced heavy withdrawal requests, more borrowers have run into trouble, and insurers have revised disclosures about where their money went. Taken together, those developments give me more reason for concern.
Investors Want Their Money Back
BCRED, Blackstone’s flagship credit fund, took in $1.9 billion from investors in the first quarter and paid out $3.2 billion in repurchases. Blackstone and senior leaders also invested through a feeder fund to help meet requests. By September, investors were asking to withdraw about twice what the fund planned to repurchase. [2, 3]
Defaults are rising too. Fitch recorded a 9.2% default rate in its group of 302 private-credit borrowers in 2025, up from 8.1% in 2024. That was a record for this group. It includes borrowers whose debts were restructured under financial pressure, as well as bankruptcies. It does not mean all that money was lost. [5]
Reported investment values have also fallen. Reuters examined 44 business development companies, investment firms that lend to businesses. The gap between what their portfolios cost and their estimated value more than tripled from December to June. The gap was still only about 2.4% of cost. That is a sign of deterioration, not evidence that most of the portfolio is in trouble. [6]
The insurance connection makes this a retirement-money issue. ALIRT reports that privately owned U.S. life insurers held nearly $1.2 trillion of invested assets at the end of 2025. That is their total investment portfolio, not just private credit. Insurers can often wait years for repayment. Waiting does not help if the borrower cannot pay. [7]
What The Insurance Disclosures Revealed
Delaware Life and Clear Spring, insurers controlled by Guggenheim CEO Mark Walter, received federal subpoenas in February. A regulatory filing also disclosed a parallel SEC investigation into investments connected to the same owners or businesses. Delaware Life later corrected its financial statements. Fitch’s analysis of the restated filings puts investments classified as connected to related parties at about 40% of its cash and invested assets, up from less than 5%. [8]
The correction revealed a much larger concentration of related investments than the earlier statements showed. That is why the disclosure matters.
Walter’s insurance holding company, TWG subsequently agreed to exchange up to $6.5 billion of related-party investments for independent assets. TWG said capital and liquidity remained strong. The announced exchange is a response to the problem; its announcement alone does not tell us the work is complete. [9]
Separately, the Financial Times reported this month that KPMG identified a material weakness in accounting controls involving $275 million of revenue at Guggenheim Private Investments. KPMG still issued clean opinions on the financial statements. Guggenheim said management acted appropriately. The accounting finding and the investigations raise questions; they do not establish fraud or missing collateral. [10]