”This is great for us.” That’s how one private credit manager summarized the cumulative impact of noise around the asset class. Tariffs, cockroaches, geopolitics, oil, and AI all took their best shots. But the best shops who stuck to their knitting in the core middle market, held dry powder, and remained trusted PE partners, find themselves exactly where they want to be.

The post-GFC zero-grav environment created an optical illusion for LPs. Low rates and spreads made all private managers look like heroes. Then came COVID. Suddenly, a flood of investors of all stripes and sizes sought private credit for inflation and rate protection. The tyranny of dry powder pushed some managers upmarket, deploying bank/bond replacement capital.

As our special series has detailed, that upper MM is where today’s challenges are being found – software concentration, high leverage, weak covenants, more PIK, etc. Traded BDCs saw NAVs compress; retail cash fled non-traded BDCs. Accordingly large cap lenders’ ability to commit in size shrunk. Core middle market managers with scale now benefit from 25-50 bps higher spreads and deal flow that has shifted to HALO – heavy asset, low obsolescence – sectors.