In bond markets, the disruption of software firms with AI technology and the warnings posed by private credit deterioration remained pressing themes for retail investors. IBM bond prices fell under pressure following the release of AI-startup Anthropic’s new tools, including Claude which can modernize Cobol, a programming language run on IBM computers. The news added to the broader, disruptive nature of AI technology and the impact it can have on legacy software companies, which extended worries into the multi-trillion-dollar private credit market with exposure to private software company lending—including business development companies (BDCs). Lastly, private credit markets showed concern following cautionary comments by JPMorgan’s CEO, Jamie Dimon, who suggested parallels between the corporate bond and private credit markets and the era prior to the 2008 Global Financial Crisis, while highlighting aggressive measures competitors were taking in the loan space to boost net interest income.   

Retail investors are increasingly using private credit funds as a way to access the private lending market and there have been several areas of concern over the last few months. These funds pool investor money to provide loans directly to smaller and mid-sized companies that typically cannot get financing from traditional banks or seek alternative terms on their lending agreements. Lower interest rates offered in traditional debt markets are encouraging some fund managers to take on riskier private debt to seek higher returns for their investors. Signs of market stress are already emerging. Blue Owl Capital made news earlier this year as it blocked retail investors from taking money out of one of its private credit funds. A distinguishing feature of private investments is for the investor to keep their money in the fund and allow the regular cadence of new investment and maturities. Faced with concerns over delinquency rates, some private investors look to withdraw their money earlier than anticipated. Facing rising redemption requests, Blue Owl sold USD$1.4 billion of portfolio loans to institutional buyers to improve liquidity in the fund. Just last week another private credit fund sold assets to improve its liquidity. New Mountain Finance sold US$477 million of investments from its private credit fund at 94% of fair value to improve its liquidity. Near the end of the week, a publicly traded private credit fund managed by Blackstone Inc. saw stress in one of its largest software company investments, Medallia Inc, marking the value of the loan down to around 78 cents on the dollar (Brad Marshall).

Alternative investment classes have received much attention from investors over the years.  Retail investors should remain aware of the distinct investment risks inherent to private credit. These alternative funds typically come with restrictive capital lock-up periods and strict guidelines on redemptions, limiting an investor’s access to their money. A critical step is carefully scrutinizing the underlying loan assets for higher exposure to ensure it is consistent with your risk tolerance. Furthermore, while the inherent opacity of private credit—with its less-frequent valuations—has historically smoothed out volatility compared to public debt markets, this lack of transparency is a double-edged sword. Events like the collapses of sub-prime auto lender Tricolor Holdings and global auto supplier First Brand Groups in late 2025 serve as a stark reminder of the systematic risks that can quickly materialize within the private credit landscape.