Private credit fund managers in North America expect conditions related to financial stress and defaults to stabilize and gradually improve over the next 12 months, according to an independent report commissioned by Ocorian, a provider of asset services in the United States and globally.
The study, conducted among private credit managers in the United States and Canada overseeing $1 trillion in assets under management, depicts a market that is neither complacent nor defensive, but increasingly disciplined as it matures and absorbs the effects of rapid growth.
More than four out of five managers (84%) expect the level of financial stress and defaults among borrowers to improve over the next year, while another 10% foresee conditions remaining broadly unchanged. Only a small minority (6%) anticipate a deterioration. The results suggest that managers consider current stress to be manageable and already reflected in lending standards, pricing, and portfolio monitoring.
Managers point to stricter structuring, greater interaction with borrowers, and increased selectivity as key elements of their outlook. Growing use of payment-in-kind (PIK) interest is expected, with 90% anticipating some increase over the next two years. Rather than being seen as a solution in itself, PIK is viewed as a cash flow management tool that can provide breathing room for borrowers, while requiring closer scrutiny and more active oversight from lenders.
At the same time, managers maintain a realistic view of the risks associated with the sector’s rapid growth. The global private credit market, estimated at around $3 trillion at the beginning of 2025 and projected to reach $5 trillion by 2029**, continues to attract capital, intensifying competition for assets.
Around 71% of managers report being very concerned about the risk that strong capital inflows may encourage aggressive lending, while the rest say they are fairly concerned. This lack of complacency reflects a heightened awareness of discipline in origination as a differentiating factor in an increasingly crowded market.
Managers are also aware of the opacity inherent in private credit markets, acknowledging that limited transparency can complicate valuation and risk assessment. However, respondents emphasize that this opacity is a long-standing characteristic of the asset class rather than a new vulnerability, reinforcing the importance of governance, reporting, and operational controls.
All managers surveyed said they maintain a high level of vigilance regarding sources of financial stress and default risk, with more than half (55%) stating they are very concerned. This concern is not framed as alarmism, but as an essential part of professional risk management in a market designed to price, monitor, and manage credit stress.
Vincent Calcagno, head of growth in the United States at Ocorian, noted: “While private credit managers are taking on risk, they are not ignoring it. The expectation of continued growth coexists with a realistic assessment of risks, valuations, and policy uncertainty. It is a market that is adapting, not retreating.”
