Private Markets Alert Newsletter

✍️ Op-Ed: The Retailization Inflection

SEC Chair Paul Atkins declared ERISA as the key to controlling private investment risks, signaling regulatory green light for 401(k) access while hinting SEC might "take a step back" from oversight. Simultaneously, 70% of RIAs now allocate to private credit—up from 62% in 2024—with 58% planning increases in 2026. Yet UBS forecasts $75B-$120B in fresh defaults across leveraged loans and private credit by year-end as AI disruption accelerates. Private credit software exposure proves higher than disclosed: firms classify obvious software companies as "business services" to obscure sector concentration. The contradiction defines February 2026: regulatory apparatus facilitates retail entry through 401(k)s and interval funds precisely as professional allocators confront sector-specific existential threats, covenant erosion, and the industry's first full credit cycle test. Atkins' ERISA reliance assumes fiduciary discipline protects participants, yet trustee expertise cannot compensate for fundamental asset-liability mismatches when semi-liquid products meet illiquid collateral experiencing rapid valuation deterioration.

🤝 Top Deals & Market Activity: Regulatory Green Light Meets Market Reality

SEC Chair Paul Atkins confirmed SEC exploring regulatory changes expanding private investment access for retirement investors during House Financial Services Committee hearing. "A lot has to rest on the trustees and other people who are managing 401(k) funds to protect their participants," Atkins said, indicating ERISA as key control mechanism. Trump's August 2025 executive order directed DOL and SEC to make alternatives more available to defined contribution investors. DOL submitted rule proposal to OMB in January for review.

Alternative Fund Advisors study shows 70% of RIAs currently allocate to private credit, up from 62% in 2024. 58% plan to increase allocations in 2026 while just 11% anticipate decreases. More than 70% of firms allocate at least 4% of client portfolios, nearly one-third allocate 8%+ to private credit. Interval funds lead adoption: 80% of RIAs using them in 2025, up from 58% in 2024. Direct lending remains most widely used strategy, while asset-based lending and specialty finance grew 23% and 12% year-over-year.

Yet UBS analyst Matthew Mish forecasts $75B-$120B in fresh defaults across $3.5T leveraged loans and private credit markets by end of 2026. Estimates assume increases up to 2.5% in defaults for leveraged loans and up to 4% for private credit. Tail risk scenario: defaults jump by twice base assumptions, cutting off funding for many companies. "The knock-on effect will be that you will have a credit crunch in loan markets. You will have a broad repricing of leveraged credit, and you will have a shock to the system coming from credit," Mish said.

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