Private credit is usually described by the spread it pays. We treat the spread as payment for judging a borrower correctly. That judgement matters most when the number of willing lenders has grown faster than the number of businesses worth lending to, as it had by early 2026.
The loans we pass on when assessing credit for client portfolios tend to share a few features: covenants that assume the credit cycle will not turn, adjusted earnings in which the adjustments make up much of the figure, and sponsor plans that depend on refinancing at rates well below those available in early 2026.
What we look for
Cash flows that can be described in one sentence. Collateral we would be prepared to own. A borrower whose downside case still covers interest and scheduled repayments.
Loan documents get the same attention as the financial model. A covenant requiring monthly reporting, for example, can justify accepting a lower yield, because it shows problems early.
Most of the loans we decline fail on one of the features described above. Leaving them out keeps a portfolio away from the borrowers most likely to struggle if refinancing costs more than their plans assume.
We prefer a small number of positions, each understood in detail. Spreading capital across many loans that are understood only in outline does little for the risk that concerns us most: a borrower we misjudged.
When this part of the market reprices, portfolios built on the assumption that credit needs little attention will be tested. We want client portfolios to have room to lend at that point.