Besides the geopolitical news that is happening now at the Persian Gulf, another event is rocking the financial markets at the moment, too, and that is private credit.
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What is Private Credit?
Traditionally, companies that required loans would either go through the mainstream banks, or via public markets in the form of bonds issuance. Private credit, on the other hand, are loans issued by institutional investors or private funds. A major attractive point of private credit to companies is that the debt structure can be negotiated with the lender, like interest rates and repayment terms. On the other end of the deal, investors who lend to companies through the private credit vehicle are expected to have higher returns to that of conventional bonds.
Though investing in private credit typically open to accredited and institutional investors, there are other slightly indirect ways for retail investors to participate using publicly listed securities. One is by investing in listed business development companies (BDCs), and the other is using exchange traded funds (ETFs). The majority of BDCs and private credit ETFs are traded on the United States market.
So, What’s the Problem Now?
A few reasons came together for the woes facing the private credit sector, with the main ones on the vulnerability of the software sector (Saas-pocalypse), and the aftereffects of having too long a period of low interest rates, which make highly leveraged companies unable to sustain payments in a rising interest rate period.
The above concerns, and in part due to private credit funds’ opaque nature of valuation, had led to a high number of private credit investors to start pulling out their monies for flight to safety. Being a closed end investment vehicle, managers of private credit funds had to curb the redemption requests as loans to companies are illiquid and could not be recalled quickly. All these resulted in a downward spiral which some analysts say may result in a crash seen during 2007/2008.
Impact
The impact on listed BDCs and private credit ETFs could be seen; BDC Blue Owl Capital (ticker: OBDC) had seen a drop of -12.6% year-to-date (YTD) of its share price, and the Simplify VettaFi Private Credit Strategy ETF (ticker: PCR) was down -13.6%, to name a couple.
Mainstreet Capital (ticker: MAIN), a BDC in our portfolio, also suffered with around -13%, and was dragged along with the rest. However, MAIN’s software exposure to software companies was relatively low (2%-6%1) as compared to OBDC’s (at least 20%2), thus in the event of a major default happening in the software sector, MAIN would probably be the least affected from a fundamental point of view.
The Bedokian’s Take
One could see the interconnectedness of the various sectors and industries at play in the markets and economy, and recognising this and knowing how it works is important. This is part of associative investing3, where one could spot opportunities and possible threats by linking up their relationships around.
As for our investment in MAIN, we are considering adding positions to it; based on our 10-30 Rule price analysis4 and using the start and end closing prices of 2025, the 0.9 times of the average price is at about USD 53.75, which is above the closing price of USD 52.63 on 2 Apr 2026, signalling an entry.
Disclosure
The Bedokian is vested in MAIN.
Related post
Inside The Bedokian’s Portfolio: Mainstreet Capital
All data is obtained and calculated from Yahoo Finance unless otherwise stated.
1 – Mainstreet Capital Corporation. Investor Presentation. Fourth Quarter – 2025. https://d1io3yog0oux5.cloudfront.net/_b292ae5bca9821007cb321f572787174/mainstcapital/db/396/11076/pdf/Q4+2025+MAIN+Investor+Presentation+-+v.2.25.26+-+320PM.pdf (accessed 3 Apr 2026)
2 – Pitcher, Jack & Wirz, Matt. Private Credit’s Exposure to Ailing Software Industry Is Bigger Than Advertised. The Wall Street Journal. 29 Mar 2026. https://www.wsj.com/finance/investing/private-credits-exposure-to-ailing-software-industry-is-bigger-than-advertised-d80da378 (accessed 3 Apr 2026)
3 – The Bedokian Portfolio (2nd Ed), p137-138
4 – ibid, p131-133
