Key Takeaways
- • MSCI data shows private credit funds have marked down more than 10% of their loans by at least 50%, highlighting mounting borrower distress across the $3.5 trillion private credit market.
- • 13% of loans held by smaller private debt funds were valued below 50 cents on the dollar, the greatest pressure in the sector according to MSCI.
- • Private debt fund returns fell to 1.8% in Q4 2025, down from 3.7% six months earlier, per MSCI's calculations.
- • Loan writedowns reached their highest level since the period following the COVID-19 pandemic, based on Q3 2025 fund data.
- • One-third of investors surveyed by MSCI said they lacked access to private market data they fully trusted, adding to concerns about valuation transparency.
Summary
Private credit funds have marked down more than a tenth of their loans by at least 50%, according to new data released by MSCI in a report published on Tuesday. The findings highlight mounting pressure on borrowers in the $3.5 trillion private credit market. MSCI characterized loans valued below 50% as a level typically associated with deep distress or risk of restructuring. The firm attributed the strain to a prolonged period of relatively high interest rates, which increased pressure on corporate borrowers and weakened their repayment capacity.
MSCI's data show loan writedowns climbed to their highest level since the period following the COVID-19 pandemic. Smaller private debt funds faced the greatest pressure from distressed borrowers, with 13% of their loans valued below 50 cents on the dollar. The underlying data was collected during the third quarter of 2025, which MSCI described as the latest available reporting period from private credit funds. The firm noted that reporting in the sector often lags significantly, a delay it said had contributed to investor concerns in publicly traded business development companies (BDCs). Investors have increasingly withdrawn from these vehicles amid worries over valuation transparency and delayed updates on loan performance.
Returns also weakened sharply in the second half of 2025. According to MSCI's calculations, private debt fund returns fell to 1.8% in the fourth quarter of 2025, down from 3.7% recorded six months earlier. MSCI said its methodology separates investment performance from investor inflows and fund payouts to give a clearer view of underlying returns.
The findings come as several large private debt managers have already reduced the value of their credit funds in recent weeks. Carlyle, Blackstone, and BlackRock have each marked down portions of their portfolios, while regulators continue to warn about systemic risks tied to bank lending exposure to private credit managers.
Alongside the report, MSCI conducted a survey showing growing investor unease over access to reliable private market data. One-third of investors said they did not have access to private market data they fully trusted. The findings underline broader concerns about transparency and valuation practices in private credit, particularly as distress levels rise and reporting delays continue to affect investor confidence.
MSCI's data show loan writedowns climbed to their highest level since the period following the COVID-19 pandemic. Smaller private debt funds faced the greatest pressure from distressed borrowers, with 13% of their loans valued below 50 cents on the dollar. The underlying data was collected during the third quarter of 2025, which MSCI described as the latest available reporting period from private credit funds. The firm noted that reporting in the sector often lags significantly, a delay it said had contributed to investor concerns in publicly traded business development companies (BDCs). Investors have increasingly withdrawn from these vehicles amid worries over valuation transparency and delayed updates on loan performance.
Returns also weakened sharply in the second half of 2025. According to MSCI's calculations, private debt fund returns fell to 1.8% in the fourth quarter of 2025, down from 3.7% recorded six months earlier. MSCI said its methodology separates investment performance from investor inflows and fund payouts to give a clearer view of underlying returns.
The findings come as several large private debt managers have already reduced the value of their credit funds in recent weeks. Carlyle, Blackstone, and BlackRock have each marked down portions of their portfolios, while regulators continue to warn about systemic risks tied to bank lending exposure to private credit managers.
Alongside the report, MSCI conducted a survey showing growing investor unease over access to reliable private market data. One-third of investors said they did not have access to private market data they fully trusted. The findings underline broader concerns about transparency and valuation practices in private credit, particularly as distress levels rise and reporting delays continue to affect investor confidence.
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