Private Credit Stands Firm: Key Index Defies Market Jitters

NEW YORK, NY – March 31, 2026 – In a direct challenge to a market rife with skepticism, new data indicates the private credit sector remained a bastion of stability and strong returns throughout 2025. The Cliffwater Direct Lending Index (CDLI), a primary benchmark for the asset class, posted a 9.3% return for the calendar year, pushing back against a narrative of growing risk and instability that dominated financial commentary in late 2025.

These results arrive at a critical juncture for the burgeoning multi-trillion-dollar private credit market. As direct lending has grown to supplant traditional banks in financing mid-sized companies, it has attracted both a flood of capital and intense scrutiny. The latest figures from Cliffwater aim to provide a data-driven anchor in a sea of speculation, suggesting that the health of private credit is far more robust than its critics believe.

A Story of 'Boring' Consistency

According to the report, the 2025 performance is not an anomaly but a continuation of a long-term trend. The CDLI has now delivered an average annual return of 9.5% over the past 20 years, experiencing only a single negative year during the 2008 global financial crisis. The primary engine for these returns was interest income, which accounted for 10.4% in 2025. Other key metrics of credit health, such as non-accruals and realized losses, reportedly held steady or improved, remaining well below their historical averages. Realized losses for the year were estimated at just 0.70%, significantly under the historical annual average of 1.01%.

This steady performance led Cliffwater CEO Stephen Nesbitt to directly address the recent wave of negative sentiment. "2025 results highlighted, yet again, the resiliency and consistency of private credit. In this asset class, 'boring' is exactly what you want—steady, reliable performance," Nesbitt stated in the press release. He added, "There was significant noise regarding the safety of private credit toward the end of 2025, but our data suggests those concerns are unfounded. The asset class remains an 'all-weather' solution and a safe haven in our view amid broader market volatility."

Confronting Market Doubts

The "significant noise" Nesbitt referenced stems from several specific concerns that gained traction among analysts and investors. Throughout 2025, reports from firms like Fitch highlighted rising default rates, suggesting they had exceeded 9% among certain U.S. corporate borrowers, particularly smaller companies. Other major banks noted similar upticks in defaults for companies in the $25 million to $50 million EBITDA range. This data fueled fears about the true quality of assets held in private portfolios, which are often criticized for their lack of transparency compared to public markets.

Concerns were further compounded by illiquidity issues, with several large alternative asset managers imposing redemption restrictions on private credit funds catering to retail and high-net-worth clients. However, proponents argue that a systemic crisis is highly unlikely. Analysts from Goldman Sachs, for instance, have pointed out that while the private credit market is large at an estimated $1.7 trillion, it represents only about 4% of total credit in the private non-financial sector—a far cry from the 45% share held by residential mortgages before the 2008 crash. Even an extreme scenario with a 10% default rate, they argued, would cause only a minor drag on GDP.

The Power of the Benchmark

Central to Cliffwater's counter-narrative is the credibility of the CDLI itself. First published in 2015 with data reconstructed back to 2004, the index was a pioneering effort to bring transparency to an opaque market. By using public SEC filings from Business Development Companies (BDCs), the index avoids the self-selection and survivorship biases that can plague other industry benchmarks which rely on voluntary data submission. Today, the CDLI tracks approximately 21,000 directly originated U.S. middle-market loans, representing $549 billion in assets, making it one of the most comprehensive gauges of the industry's performance.

This role as a benchmark setter has been crucial in shaping institutional and retail understanding of the asset class. The success of the main index led Cliffwater to create a full suite of sub-indices tracking everything from perpetual BDCs to upper-middle-market loans, providing a more granular view of the market. While other benchmarks from providers like MSCI and Preqin also exist, the CDLI's long history and transparent methodology have made it a widely cited source for validating the performance and risk profile of direct lending.

The Road Ahead

Looking forward, the debate over private credit's risk-reward profile is set to continue. The health of the underlying middle-market borrowers remains a key variable. While the CDLI's low realized loss rates paint a positive picture, the contrasting data on rising default rates from other sources suggests a potential dispersion in performance, where skilled credit selection becomes paramount. Experts note that the historically strong lender protections and conservative loan structures common in private credit have provided a crucial buffer against losses.

The sector's rapid expansion, often termed the "democratization of private credit," is also bringing new dynamics. The push to offer these strategies to retail investors through evergreen funds and ETFs is attracting both assets and regulatory attention. Industry insiders expect scrutiny from regulators to intensify across all jurisdictions, while environmental, social, and governance (ESG) considerations are also becoming a more significant factor in investment decisions.

Despite the headwinds and debates, investor appetite appears unabated. A 2025 survey from Preqin found that 81% of investors planned to either maintain or increase their allocations to private credit. Major asset managers like BlackRock and KKR continue to project strong long-term growth, viewing the asset class as a vital source of floating-rate yield and a shock absorber in volatile public markets. As one analyst noted, the ability of experienced general partners to navigate the environment and deploy capital effectively will be the key differentiator in the years to come.