I posted about Private Credit CLOs back in March. The business has 100x in only a few years. Now medium sized businesses are seeing margins compact AND their variable rate debt in the form of CLOs rates going higher. Private Credit is about to see a default cycle.

Private Credit loans to medium sized businesses that are too large for banks and too small for investment banks or public bonds have exploded. With mega PE firms chasing into it, hedge funds chasing into it, and new Private Credit shops by the hundreds year after year in a very short time. From billions to hundreds of billions in loans now exist. Private credit loans tend to be variable rate loans and for the riskier have equity kickers. With tariffs causing 10-20-50% margin compression, there is likely to be a default wave. Bloomberg annoys me as I have Xing them every day for 28 days and then they put out the note. I have been pitching into to funds, who say great idea but we will take it from here. Well, retail. keep an eye.