Private Markets Alert Newsletter

✍️ Op-Ed: Cracks in the credit façade

The private credit market's veneer of stability is beginning to show fissures that demand serious attention. Jeffrey Gundlach's warning that private credit represents "the next big crisis in the financial markets" carries particular weight coming from one of Wall Street's most respected bond investors. His comparison to subprime mortgage repackaging in 2006 should serve as a sobering reminder that rapid growth in opaque, lightly regulated markets tends to end badly.

The Blue Owl fund merger debacle this week crystallized these concerns in real-time. When a planned combination of two credit funds triggered a 6% stock collapse simply because investors realized they'd face 20% paper losses upon merger—and couldn't redeem to avoid it—the market received a stark lesson in private credit's liquidity illusion. Blue Owl wisely reversed course, but the damage to confidence extends well beyond one transaction.

Fed Governor Lisa Cook's remarks add institutional weight to these concerns. Her observation that private credit's "increased complexity and interconnections with leveraged financial entities create more channels through which unexpected losses could spread" echoes warnings from the IMF and multiple Fed research teams. The sector has doubled in five years to approximately $1.7 trillion, and when growth that rapid occurs in markets with minimal regulatory oversight, problems tend to accumulate unseen—until they don't.

The market isn't broken yet. But the combination of rising PIK usage, recent corporate collapses revealing unexpected exposure across financial entities, and valuations that move from 100 to zero overnight suggests prudent investors should be asking harder questions about their private credit exposures before the next stress test arrives uninvited.

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🤝 Top Deals

This week's standout transactions.

• J.P. Morgan Asset Management closed its PEG Co-Investment Fund II above target at $1 billion, exceeding its $750 million goal. The fund will focus on small- and middle-market buyouts, leveraging the firm's network of 250+ GP relationships built over four decades of private equity investing.

• Q3 2025 Megadeals drove global PE investment to $537 billion during the quarter. The three largest U.S. transactions alone contributed $95.3 billion: Electronic Arts ($56.4 billion), Air Lease ($28.2 billion), and Dayforce ($12.4 billion)—all public-to-private buyouts reflecting PE's continued appetite for quality assets.

• Pension Insurance Corporation was acquired for $7.7 billion in the largest European deal of Q3, followed by Advent's $6.4 billion take-private of UK-based Spectris.

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