Arcmont CEO Says Private Credit Demand Holds Firm

Low default rates are keeping institutional money in private credit even as retail investors turn cautious, according to Arcmont Asset Management Chief Executive Officer Anthony Fobel. He said confidence in the asset class is stronger than widely reported, drawing a line between professional allocators that are staying put and individuals who have been rattled by the broader market mood.

The key consequence is simple: the funding base that matters most to large private credit managers still looks intact. That matters for deal flow, portfolio valuations and competition for assets, and it lands as investors across markets weigh higher-for-longer rates and the fallout from geopolitical risk covered in Stocks Face Oil, Rates and AI Reality.

Background

Fobel's argument rests on one hard point. Defaults in portfolios remain low, he said. In private credit, that metric carries more weight than chatter because institutions don't allocate on headlines alone. They allocate on loss experience, cash income and whether managers are still preserving capital.

That split between retail nerves and institutional conviction isn't surprising. Retail money reacts faster to volatility, to broad risk-off moves and to fear around illiquid assets. Pension funds, insurers and other large allocators move slower. And once they're committed, they tend to judge managers over a cycle rather than over a week.

The wider market backdrop helps explain why the gap has opened. Borrowing costs remain elevated, public markets have been forced to price persistent inflation risk, and credit investors are still recalibrating after years of easy money. The result: private credit gets judged through two lenses at once — one emotional, one analytical. The analytical one is winning inside institutional committees.

That matters because private credit has become a core source of financing as banks have pulled back from parts of leveraged lending and sponsor-backed dealmaking, according to reports. The mechanics are well understood in institutional circles. Investors accept illiquidity in exchange for yield, tighter documentation and direct access to borrowers. Retail buyers, by contrast, are more likely to focus on redemption risk, pricing opacity and whether stress could build out of sight. For a primer on how fixed-income markets have been digesting risk, see Bonds Fall as Middle East Strikes Lift Oil.

What this means

It means the private credit machine is still running. If institutional investors keep backing managers despite shakier retail sentiment, fundraising won't collapse. It may get more selective. But the large, established firms with proven underwriting records should keep attracting capital, while weaker managers face a harsher test.

That's the real dividing line now. Not private credit versus public credit. Good underwriting versus weak underwriting. Fobel's point cuts through the noise: low realized defaults tell investors the asset class hasn't broken under higher rates. Until that changes, institutions will keep treating pullbacks in sentiment as a pricing issue, not a structural indictment.

Still, this isn't a blanket all-clear. A low default rate today does not erase refinancing risk tomorrow, and private credit portfolios will eventually face a harder maturity wall if growth weakens or rates stay elevated for longer. But institutions know that already. They've stayed because current portfolio performance gives them evidence, not hope.

The losers are the managers who raised money on momentum alone. They now need to prove they can navigate a tighter environment where scrutiny is rising and investors are less willing to forgive weak covenants or aggressive marks. The winners are established platforms that can show cash generation, sponsor discipline and limited impairments. That changed when higher rates stopped being temporary and became the market's base case, a shift tied to the same repricing pressure behind Iran and Israel Exchange Strikes, Markets Brace.

Low defaults are doing more to support private credit than the market mood is doing to hurt it.

The broader policy and market context reinforces his point. Higher interest rates set by central banks such as the Federal Reserve and the European Central Bank have raised debt-service burdens across corporate finance. Yet low defaults suggest many borrowers in these portfolios are still managing the pressure. That's the signal institutions are following. Retail investors are following the noise.

Private credit also sits in a larger shift in global finance. As traditional lenders face tighter capital rules and balance-sheet limits, nonbank credit has expanded, a trend documented by bodies such as the International Monetary Fund and the Bank for International Settlements. And investors looking at the structure of the market can trace the model through the growth of private credit itself. Fobel's message fits that reality. Institutional capital hasn't backed away because the core case for the asset class remains intact.

What to watch next is whether managers begin reporting any clear rise in defaults or restructurings over the next round of portfolio updates and fundraising conversations. That's the test. If default rates stay low, institutional allocations should hold. If they turn, sentiment will change fast — and this time retail investors won't be the outliers.