Private credit funds have considerably reduced the reported value of a notable portion of their loan books, according to fresh data compiled by MSCI. The research shows that more than one in ten loans held by these funds are now valued at less than half of their face amount, a threshold MSCI describes as typically indicative of deep financial distress or the potential for restructuring.
The private credit market at stake is sizable - MSCI cites an overall market scale of $3.5 trillion. The report, released on Tuesday, points to a prolonged period of relatively high interest rates as a factor that has left some corporate borrowers struggling to service and refinance debt.
In recent days, several of the largest participants in private credit have adjusted fund valuations downward. Managers named in the report include Carlyle, Blackstone and BlackRock, which have taken marks on credit funds. Separately, regulators have raised concerns about systemic vulnerabilities that could arise because major banks are lenders to these asset managers.
MSCI's key findings
- Writedowns in private credit funds are at the highest level since the immediate aftermath of the COVID-19 pandemic, according to MSCI's dataset.
- Smaller private debt funds are showing the greatest share of distressed loans - MSCI reports that 13% of loans held by these smaller managers are now valued below 50 cents on the dollar.
- The writedown figures derive from data collected in the third quarter of 2025, which MSCI notes is the most recent period available from private credit funds that commonly report with a significant lag.
- MSCI also points to delayed reporting as a contributor to investor behavior - specifically, the trend of retail and institutional investors redeeming from business development corporations (BDCs), which trade on public markets.
- Using MSCI's method that separates investment returns from cash flows into and out of funds, private debt funds' returns fell to 1.8% in the fourth quarter of 2025, down from 3.7% six months earlier.
- In a survey tied to the report, roughly one-third of investors said they did not have access to private market data they fully trusted.
The MSCI findings portray a market where valuation adjustments and reporting lags are shaping investor sentiment. The data highlights an elevated level of credit stress among borrowers in private debt strategies, with smaller funds disproportionately affected. The report underlines concerns among market participants about the transparency and timeliness of private market disclosures.
MSCI's survey responses also underscore an information gap: a material share of investors say they lack fully trusted private market data, a factor that can complicate valuation debates and liquidity decisions across vehicles such as BDCs.
While the report does not assign a single causal driver beyond noting the high-rate environment, it documents how valuations, reported returns and investor confidence have moved in recent quarterly snapshots. Regulators' recent warnings and the valuation actions taken by major managers signal heightened market attention to how stress in privately originated loans could ripple through connected lenders and investment structures.