2026 Mid-Year In Focus

Private credit remains attractive because resilient credit quality, durable yield premiums, structural growth and diversification opportunities outweigh near-term uncertainty.

• Direct lending has maintained an average yield premium of approximately 200 basis points over public loans for the past three years, despite spread volatility in 2026.
• Borrower defaults are roughly 2.0%, below the 2.7% historical long-term average, while concerns about AI-driven disruption in software have shifted toward a more balanced assessment of durable competitive advantages.
• Direct lending represents about 25% of the leveraged credit market and is expected to reach 30% by the early 2030s, although deal activity was muted in the first half of 2026.
• Asset-based finance offers exposure to a more than $13.5 trillion addressable market, yet dedicated fund-manager AUM is only slightly above $500 billion; diversified collateral pools and protections such as overcollateralization and reserve accounts can reduce individual borrower risk.
• Floating-rate structures, covenants and direct borrower relationships may help portfolios navigate uncertain rates and inflation, while larger managers can pursue adjacent opportunities in asset-based finance and secondaries.

Takeaway: Blue Owl remains optimistic about risk-adjusted private-credit returns, but expects wider performance dispersion and argues that investors should prioritize scaled managers with disciplined underwriting, proprietary sourcing and specialized capabilities.