Finance
Partners group warns private credit default rates could double in next few years, FT reports
Published by Global Banking & Finance Review®
Posted on March 12, 2026
2 min readLast updated: March 12, 2026
Quick Summary
Partners Group Chair Steffen Meister warns that private credit default rates, which averaged 2.6% over the past decade, could double in the coming years amid AI-driven disruption. Growing investor anxiety is compounded by markdowns and redemption pressures at major lenders like JPMorgan, BlackRock,
Private Credit Default Rates Could Double, Warns Partners Group Chairman
Rising Risks and Market Reactions in Private Credit
Warning from Partners Group Chair
March 12 (Reuters) - Swiss private equity firm Partners Group Chair Steffen Meister has warned that default rates in private credit could double over the next few years, as lenders may bear the full downside of AI-driven economic disruption, while seeing only limited upside, the Financial Times reported on Thursday.
AI-Driven Economic Disruption
Private credit would be disproportionately affected by the AI-driven economic disruption relative to private equity, as it would lead to a bifurcation of outcomes with more companies performing particularly well or badly, he told the FT.
Investor Concerns and Industry Exposure
Meister's comments come as investor concerns about the $2 trillion industry deepen, driven by worsening credit quality and the threat artificial intelligence poses to the business models of software companies private credit lenders have high exposure to.
Historical Default Rates and Portfolio Management
He told FT that annual defaults in private credit averaged 2.6% over the past decade and that default rates had been “so low” that private credit lenders managed diversified portfolios of loans that they then levered again.
Recent Market Turmoil and Institutional Response
Bankruptcies and Market Anxiety
The private credit market has been gripped by anxiety since the bankruptcies of auto-parts maker First Brands and subprime lender Tricolor last year.
Scrutiny and Growth of the Private Credit Market
The fallout has sharpened scrutiny of a market that has grown quickly, drawing large institutional investment and rising corporate lending in recent years.
Institutional Adjustments and Fund Withdrawals
JPMorgan Chase reduced the value of some loans to private credit funds after reviewing the impact of market turmoil around software companies, two sources told Reuters on Wednesday.
Last week, BlackRock said it limited withdrawals from a flagship debt fund after a surge in redemption requests, while Blackstone disclosed that its private credit fund, known as BCRED, faced a surge in withdrawals in the first quarter.
(Reporting by Preetika Parashuraman in Bengaluru; Editing by Sumana Nandy and Ronojoy Mazumdar)
Key Takeaways
- •Partners Group cautions that defaults in private credit could surge from a decade-long average of 2.6%, as AI accelerates economic divergence and impacts vulnerable sectors such as software.
- •Investor concern is intensifying, with JPMorgan marking down private credit exposure in software, while BlackRock, Blackstone, and others face redemption stress and imposed limits on withdrawals.
- •UBS’s worst‑case scenario projects private credit default rates as high as 15% under severe AI disruption, emphasizing systemic risks in the sector.
Frequently Asked Questions about Partners Group warns private credit default rates could double in next few years, FT reports
1Why does Partners Group believe private credit default rates could double?
Partners Group Chair Steffen Meister warned that AI-driven economic disruption could hurt private credit portfolios, causing default rates to double over the next few years.
2How might artificial intelligence affect private credit compared to private equity?
Meister noted that AI disruption would disproportionately impact private credit, leading to bifurcated outcomes, with some companies doing very well and others performing poorly.
3What concerns are investors raising about the private credit market?
Investors are concerned about worsening credit quality, the $2 trillion market's rapid growth, and AI's threat to software business models linked to private credit exposure.
4What recent events have increased scrutiny on the private credit market?
Bankruptcies like First Brands and Tricolor, as well as fund withdrawal restrictions from BlackRock and Blackstone, have intensified concerns about market stability.
5How have financial institutions responded to the turmoil in private credit?
JPMorgan Chase reduced loan values after reviewing software sector impacts, while BlackRock and Blackstone limited withdrawals from their private credit funds.
