Private Credit Defaults Hit Five-Year Highs at Major Firms

Private-credit loan defaults at Ares Management, Blackstone, Blue Owl Capital, and Golub Capital reached their highest levels since at least 2021 in the second quarter of 2026. Data shows nonperforming loans hit five-year highs, while funds managed by Ares, Golub, and KKR reported that borrowers on watchlists for deteriorating performance reached levels not seen since 2022-23.

Financial stress is currently concentrated in healthcare companies and businesses affected by oil prices, though analysts warn that defaults could spread to software firms. Annual returns for these funds have dropped from historical levels of 10% or more to below 7%, a decline driven by falling benchmark interest rates, public debt market selloffs, and slowed dealmaking.

Fund managers have offered differing views on the trend. David Golub of Golub Capital characterized the current environment as a standard credit cycle, while Marc Lipschultz of Blue Owl Capital maintained that credit health remains strong and that there has been no meaningful change in the company's watchlist compared to the previous year.