According to Merriam-Webster, apophenia, or mistaken pattern recognition, is “the tendency to perceive a connection or meaningful pattern between unrelated or random things.” We see this happen all the time in capital markets. 

After the GFC, the usual suspects were rounded up. While sub-prime mortgages were clearly the culprits, leveraged loans and CLOs were also included, though neither contributed to it. The charges – rapid growth, “complexity” and proximity to the banking system – have today put a bullseye around private credit. But the evidence tells a different story.

Historically, systemic crises share two defining features: Size large enough to matter, and direct linkages capable of transmitting losses across the financial system. Private credit, despite its remarkable growth, is not guilty on both counts.