Partners Group Warns Private Credit Defaults Could Double
Partners Group warns that private credit default rates could double due to AI disruption. Lenders face rising risks as credit quality declines in the sector.
Steffen Meister, the Chair of the Switzerland-based private equity firm Partners Group Holding AG, has warned that default rates within the private credit sector could double over the next several years. According to reports, Meister believes that lenders may face the full brunt of downside risks stemming from artificial intelligence-driven economic disruption while capturing only limited upside potential.
The private credit market, currently valued at approximately $2 trillion, is increasingly under scrutiny as credit quality softens. Meister noted that annual defaults in private credit averaged 2.6% over the past decade, a rate he characterized as being low enough to allow lenders to manage highly leveraged, diversified portfolios. However, the emergence of AI is expected to create a bifurcation of outcomes among borrowers, leading to more extreme performance gaps.
