In this episode, Future Standard’s Investment Research team members, Alan Flannigan and Andrew Korz, are joined by Rob Hoffman, Head of Credit Solutions, for a data-driven look at what’s really happening in private credit right now. They unpack the biggest headline concerns—PIK usage, redemption activity and gates, bank financing, defaults, software exposure and valuations—and explain how structure, lender protections and income durability shape outcomes across cycles. The discussion cuts through noise to highlight why selectivity, entry discipline and manager skill matter most for investors navigating today’s market.

Alan Flannigan: In our 2026 private credit outlook, we suggested that the market is experiencing a collective Dunning-Kruger moment, a well-known psychological phenomenon, explaining the relationship between knowledge and confidence that progresses in four distinct phases.

Initial hubris, where confidence is high though knowledge is low, shaky confidence as one learns more, followed by the valley of despair in which one’s now moderate knowledge causes confidence to crater. One may doubt that they think what they think they know and fear that of which they may still be unaware.

And at this point, many throw in the towel. It’s just not worth it. I will never figure this out. That’s the valley of despair. And for those in the private credit industry, it certainly feels like that’s where we are today. Headlines proclaiming private credit’s demise are inescapable, but what we have often found are sort of half-truths or fractional analysis that’s then extrapolated into much larger claims about the market holistically.

But amid the frenzy, too few have stopped to ask the most basic questions. For example, if the economy is strong, corporate margins near all‑time highs, and distress across high yields, syndicated loans, and bank commercial lending—markets parallel to private credit—are low, how exactly is it that private credit alone is supposedly crashing?

Please explain. How about the fact that the aggregate leveraged credit market in spite of private credit’s growth has shrunk as a percentage of GDP each year since 2020? But wait, it’s a bubble, right? Unlikely. Bubbles usually grow. What you may find is that the loudest voices are the ones offering a logic that requires the greatest leap of faith.

Instead, there’s likely a more grounded explanation. As higher rates escalated the income-driven return on core direct lending, private credit attracted new adopters and increased attention. So instead, the level of angst may better reflect the collective learning underway than the true state of corporate borrowers.

To that end, recent events should be an urgent call to double down on education, and we hope this podcast is helpful in serving that objective. Because there’s only one way through the valley of despair, and that is to stay engaged and continue to learn.

Reaching the final stage, the so-called slope of enlightenment, means recognizing that though reality has been sensationalized, the playbook is indeed changing. Maximizing the value private credit may provide now requires a different approach. It’s not the time to throw in the towel, it’s exactly the opposite. It’s time to dig in and differentiate on the value proposition you provide. Be there and be present to guide and inform, especially in times most challenging and uncertain. That’s the standard for true partnership we seek to provide because delivering a solution for clients’ income and diversification needs is worth it.

Joining me today are two gentlemen who never call it quits, Andrew Korz and Rob Hoffman. Andrew is my podcast co-host and Senior Vice President of Investment Research. Thank you for joining.