Last week, Goldman Sachs held a client call to discuss the investment implications of the war in Iran.

Kunal Shah, a senior executive and the global head of fixed income currencies and commodities,

responded to a question about the views of Goldman's clients on the conflict

by saying that some of the bank's private markets clients were just glad

that there's something to talk about that isn't software exposures in private credit.

He went on to say, this is at least a distraction from that.

Now, we can't allow ourselves to be distracted around here, so instead of talking about the war in Iran, we have to talk about private credit.

The $1.8 trillion dollar world of shadow banking that investors have been increasingly worried about over the last six months or so.

If you want to know how worried they are, you just have to look at the stock market.

The share prices of the world's biggest alternative asset managers have been in a free fall.

Since the start of 2026, Blue Owl and Aries Management have seen their stocks plunge by around 40%,

while KKR Blackstone and Apollo have all shed more than 25% of their market value.

Private credit is essentially direct lending to mid-market companies that are often owned by private equity sponsors.

It's an asset class predicated on the illiquidity premium. Investors trade the ability to exit a position on a whim for a higher yield and a bespoke contract tailored to the borrower's specific cash flow needs.

Private equity firms, who are the big borrowers, tend to use a lot of leverage, meaning that they tend not to be the most credit

worthy. This ecosystem grew rapidly after 2008, as traditional banks strangled by post-crisis

capital requirements were forced to retreat from riskier lending. For a long time, this was

heralded as a golden age for credit, with firms like Blackstone

and KKR offering returns as high as 13% with almost no reported losses.

Some funds even advertised loss rates of less than one tenth of one percent, a figure

that would make most bank risk officers weep with envy.

But as interest rates have risen, and many parts of the economy have started to cool,

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