People seem to like listening to better offline on YouTube so here’s the monologue on there
youtu.be/j7ffCUb7cnM?...

Monologue: On Dangerous Rhetoric Podcast Episode · Better Offline · April 17 · Bonus · 12m

Here’s this week’s’ Better Offline monologue. I discuss how AI labs’ dangerous rhetoric around AI capabilities and job loss is antagonizing society, and that de-escalation starts with Altman and Amodei talking about LLMs as normal software.
podcasts.apple.com/us/podcast/b...
linktr.ee/betteroffline

Premium: The Hater's Guide to Private Credit A few years ago, I made the mistake of filling out a form to look into a business loan, one that I never ended up getting. Since then I receive no less than three texts a day offering me lines of cred...

Premium newsletter: The 16k word Hater's Guide To Private Credit - a comprehensive guide to the massive, opaque and barely-regulated loan industry gambling with $1.5tr+ of retirement and insurance funds - and how software and AI may break its back.
www.wheresyoured.at/hatersguide-privatecredit/

Waiver

They should ban or at least charge a massive tax on slow-mo in movies

If you had told 90s me that one of the most satisfying uses of my money in 2026 would be subscribing to a newsletter with regular, heroically long, detailed, annotated pieces that I would compulsively read, drink in hand, chuckling about how stupid this timeline is, and how fucked we are…

Joined the @somemorenews.bsky.social team to talk about the greater AI bubble and how it's turning people even further against the tech industry

Tanguy Destable, THE Ohio State University

‘The AI industry is ignoring how much people hate it’ | Ed Zitron YouTube video by The Tech Report

Joined the Times Tech Report to talk about the dangerous rhetoric spread by Sam Altman and Dario Amodei, and how the AI industry needs to stop threatening people with job loss as a means of hyping their products.
youtu.be/Dhx5RoOXrhk?...

it's in the piece

The most-chilling part of this piece was the study from Moody's that found that nearly half of all BDCs (usually either private equity or private credit funds) were junk grade or speculative grade investments, despite most acting like they're investment-grade.
www.wheresyoured.at/hatersguide-...

What I fear is a creeping death — a mounting pile of unpaid software loans that leads to a dearth of payouts from funds that grows over multiple quarters, and as it reaches its precipice, so too will begin a series of data center delinquencies and unpaid loans. In most cases, said data center debt is collateralized using GPUs which depreciate in value on a yearly basis, and will have low resale value as a result, as well as because if AI demand doesn’t arrive, everybody will be trying to sell the fucking things. And really, I’ve overly focused on software, when the private credit problem is much, much larger. Perhaps this is a situation where it simply leads to more aggressive interest rate hikes, a way for the government to paper over the death of the prime yield fodder. Doing so will aggressively raise the cost of debt in America in a way the greater finance industry might not be able to stomach — which might not matter depending on how badly private credit melts down. In any case, private credit may have burdened itself — and its unfortunate backers — with hundreds of billions, of questionably-underwritten loans peddled at unsustainable rates. I fear that private equity and private credit have set up our insurance and retirement funds for disaster, as well as any other associated parties that have sunk capital into the coffers of their local asset manager. For once, I really hope I’m wrong. I don’t think that I am.

Yet the most terrifying part of the private credit bubble is that pension and insurance funds are overwhelmingly exposed, with 30%+ of private credit in poorly-underwritten software loans, and loans to AI companies like CoreWeave. I'm deeply concerned.
www.wheresyoured.at/hatersguide-privatecredit/

AI Data Centers Are Fragile, Near-Negative-Margin Businesses Sold As Stable Infrastructure, Funded By Pension and Insurance Funds This is why Crusoe was able to raise a $750 million credit facility from Brookfield in June 2025, funded out of Brookfield Infrastructure Debt Fund III, which in turn is funded by retirement and insurance funds like the Maine Public Employees Retirement System and the Border To Coast Pensions Partnership. Crusoe is an unprofitable business, and makes the majority of its money from lease payments from Oracle and its Stargate Abilene data center that Crusoe is constructing — which means that its survival is tied to that of OpenAI, and Oracle’s willingness and ability to support OpenAI. OpenAI, a company that burns billions of dollars a year, cannot afford to pay for the compute it has committed to buying. In the event that OpenAI defaults on its contract, Oracle will be left without any comparable tenant, and Crusoe will be left with no revenue to pay back its debts. The same goes for the Blackstone- (and pension!) backed loans that are funding Oracle’s Wisconsin and Texas data centers. Oracle does not have the money to pay its debts, and will only have the money in the event OpenAI is able to pay it upwards of $100 billion a year, which will require Oracle to complete the data centers, which will take until, at best, 2028 or 2029.

Private credit is a giant systemic weakness, but not the kind that explodes like Lehman Brothers or Bear Stearns. This will be a collapse that takes months or years to manifest, a slow burn that erodes the ability for private credit funds to make payouts to their investors, which will in turn erode the ability for insurance and pension funds to make payments. Software companies given debt based on rosy valuations and unrealistic revenue targets are already beginning to miss their payments, and it’s very clear (as Rod Dubitsky showed in a piece I mentioned earlier) that asset managers can — as no regulation exists to stop them — chop up loans and pretend that everything is fine as a means of hiding the true decay of their loan portfolios. AI data centers are even riskier, because they are inherently a commoditized industry. A data center full of GB200 NVL72 racks offered by CoreWeave is the same as one offered by CyrusOne, and the $178.5 billion in US data center debt issued last year exists only to build near-identical data centers of identical NVIDIA chips offered in near-identical products. For any of this to make sense, we need about five to ten times the amount of demand for GPUs — over $150 billion a year for an industry that appears to have no more than $30 billion in annual revenue, and said demand needs to exist in three years time, when the majority of these data centers are actually ready to make money. Said data centers will be, at the time, full of years-old Blackwell (and Vera Rubin, by that point) GPUs, and because so many will be coming online at the same time, prices will be compressed as data centers compete for what demand exists.

Private credit was already in trouble before the AI bubble. Now it's become heavily levered - in the tens or hundreds of billions - in fragile, negative-margin AI data centers that are increasingly-commoditize and built for demand that doesn't exist.
www.wheresyoured.at/hatersguide-privatecredit/

Private Credit is New (And The AI Bubble Changes Everything) One tidbit that caught my attention in the University of Chicago paper mentioned earlier is that there’s very little academic research on private credit. This isn’t much of a surprise. Private credit largely became a thing because, in the wake of the global financial crisis, banks were restricted in the kinds of bets they could make. Private credit companies aren’t banks, and thus, the same rules don’t apply. At the same time, the post-GFC world was awash with cheap money, as central banks slashed interest rates to rock-bottom levels in order to stimulate the ailing economies of industrialized nations. Additionally, the economic conditions of the early 2010s allowed private equity firms to buy insurers, who then directed their capital towards private capital. This is how private credit became a massive, hulking behemoth overnight. And, because of its newness, we don’t really understand it as well as more traditional corporate financing products. What scarce research that does exist comes from a pre-AI bubble era, when deals were mostly centered on helping companies manage cashflow, or in backing private equity acquisitions. This is brand new territory.

Private Credit has never been tested in bad times The emergence of private credit happened after the global financial crisis. Since then, things have been — for the most part — pretty good, economically speaking. Sure, there was the disruption of the ovid era, but it wouldn’t be accurate to really describe that as an economic downturn, considering that businesses and consumers were heavily shielded from the economic effects of the pandemic in a way they weren’t during, say, the 2008 financial crash. And so, we don’t really know what’ll happen if things do go bad — and whether private credit can, as the Bank of England put it, “amplify economic and financial shocks.” The rapid growth of private markets, interconnections with banks, insurers and leveraged finance markets, as well as potential vulnerabilities related to use of leverage (both by private market funds and their portfolio companies) and the extent of reliance on credit rating agencies, have the potential to amplify economic and financial shocks. A presentation from the European Banking Authority makes the same case.

Private Credit is not Transparent The combination of private credit’s newness, as well as its status as an alternative investment, means it’s hard to see how much money is being pushed through lenders, where it’s coming from, where it’s going, and how bad the default rates actually are. In the same Moody’s report mentioned earlier, we have this line: Yet, the opacity of the asset class makes it difficult to estimate a market-wide measure of credit risk. This comes from one of the three biggest companies in the world that literally specialize in measuring credit risk.

Private credit is a new and deeply rotten part of the financial system, and I’m terrified of what will happen next. Many of its loans were issued during the ZIRP era, meaning many companies have taken debt based on projections that aren't being met.

www.wheresyoured.at/hatersguide-privatecredit/

In truth, TCW Direct Lending VII LLC is a fund in deep trouble, with 61% of its FY2025 income “paid in kind,” meaning “not paid in cash at all.” And PIK only has value if the loan gets paid one day. The fund has been extended twice, and was backed by the Minnesota State Board of Investment, among other investors. Things don’t get better when you look at TCW’s previous fund, annoyingly named “TCW Direct Lending LLC,” which has been extended five times, with 27.8% of its 2025 income “paid in kind.” To make matters worse, 49.7% of the fund’s deployed capital went to two companies (Pace Industries and Animal Supply Company) that have both had their valuations marked down aggressively, and marked as “non-accrual,” which means TCW doesn’t think that payment is likely. It was backed by multiple pension and insurance funds. These are the kinds of “cockroaches” that Jamie Dimon warned about — private credit funds issuing stupid loans to crap companies, leading to questionable returns.

TCW Direct Lending VII, the latest private credit fund from TCW, marks 61% of its FY2025 income as "payment-in-kind," meaning that over half the fund's income in 2025 wasn't in cash. It's on its second extension, and may be forced to liquidate.
www.wheresyoured.at/hatersguide-privatecredit/

As a result, TCW gets to pretend that things aren’t quite as bad as they seem, even as (per Bloomberg) Red Lobster “...continues to burn cash, losing money in four of the last five quarters as onerous leases weigh on turnaround efforts.” No regulation exists to force TCW to revalue its loans, nor is there any that forces them to reveal how these assets were valued in the first place. TCW acquired Red Lobster in September 2024 a few months after it went bankrupt, creating “RL Investor Holdings LLC” with Fortress Investment Group and Blue Torch. In doing so, it converted some of Red Lobster’s existing debt into “non-income producing equity” (the stock it had to mark down), and immediately issued it a loan of around $44 million at somewhere between an 11% and 13% interest rate. How much do you think Red Lobster has paid on that loan? If you answered “nothing,” you win 10,000 smile points.

I’ll explain. Digging into TCW Direct Lending VII’s 2025 annual report and looking for Red Lobster leads you to the one thing you do not want to see: “PIK,” or “Payment-In-Kind.” “Payment-In-Kind” is a euphemism for “not paying the debt at all,” adding the payment you’d make onto the overall loan balance, accruing interest until the day you supposedly pay it. Put another way, instead of marking a loan as “in default” because the borrower can’t pay it, the fund simply makes the loan larger (and in some cases raises the interest rate). In this case, that “all PIK” denominator means that Red Lobster hasn’t paid a single dollar on the loan in the last year, which is why its loan balance increased by $10.3 million in the last year.

Private credit is inherently deceptive, and as mentioned regularly marks unpaid loans as "payment-in-kind," as TCW Direct Lending did with its $52m loan to Red Lobster, which it values at 100% despite Red Lobster *never making a payment*.
www.wheresyoured.at/hatersguide-privatecredit/

The Journal reported that nearly half of the private credit assets held by insurers were rated by companies like Egan-Jones, and that unlike publicly-traded securities, said ratings (called “private letter ratings”) aren’t published openly, but rather only available to the debt issuer and investors. This, in turn, makes it a lot harder for state insurance regulators to assess whether insurance companies are making a bunch of dumb investments with customer funds.

And said ratings quite often diverge significantly from those which the NAIC — the nation-wide insurance regulator and standards body — would ascribe, with some “up to six notches higher than what NAIC analysts thought was appropriate for the investments,” and seventeen firms giving investment-grade ratings to assets the NAIC staff would otherwise mark down as a “junk bond.” The NAIC’s findings were from a report from 2024 called “Private Ratings Among U.S. Insurer Bond Investments Continue To Rise and Have Nearly Tripled In Five Years,” which also added that small credit rating providers like Egan Jones accounted for almost 86% of insurers’ private ratings as of year-end 2023. In May 2025, the NAIC pulled the report, claiming that it needed to “undergo further editorial work to clarify the analysis present,” and that it was “based on a limited, non-representative dataset.” No further updates have been made The report is otherwise unavailable online, but that didn’t stop me from getting it and finding out that the sample size in question was $180.2 billion, or 51% of total privately rated securities as of the end of 2023. While I can’t say for sure, this feels like a situation where a standards body was intimidated or forced by an unknown party to pull research that might expose something dangerous.

It's hard to gauge the level of risk underlying private credit. For example, a lot of insurance-backed private credit deals are rated in private by tiny agencies like Egan Jones, currently under investigation by the SEC for its overly positive ratings.
www.wheresyoured.at/hatersguide-privatecredit/

The same IMF paper shows that private equity-influenced (influenced, not necessarily owned) insurers allocate nearly twice as much capital to illiquid assets (which includes private capital) compared to insurers that have no private equity influence. And so, you end up with the ultimate conflict of interest: Private equity is the dealmaker. Private equity does the deal-hunting and vetting for private credit. Private credit is beholden to private equity for deal flow. While an asset manager’s private credit fund can’t lend money to its own private equity funds, it still relies upon other PE funds for dealflow to deploy capital. Private credit provides the capital for private equity to play with. And said capital is largely for the benefit of private equity and private credit.

Speaking of risk, the IMF paper notes that private equity-influenced life insurers are “more vulnerable” to downturns in the economy, like a spike of inflation that would result in higher interest rates. It also raises the question of whether said insurers are correctly calculating the risk of having so many illiquid assets on their balance sheet. It also points out that the investments themselves — and not simply the fact that they’re illiquid — are riskier, citing a paper from The Review of Financial Studies published on July 14, 2023, which points out that these firms decrease their holdings of safer (and liquid) corporate bonds, and start buying more dangerous shit, like private-label asset-backed securities (ABS’s). Not mentioned directly, but certainly included in the list of “dangerous shit” is, naturally, private credit.

Asset managers like KKR buying retirement/insurance funds to invest in private credit are statistically proven to immediately start making riskier and more-illiquid bets, getting management fees for investing or backing their own companies.

www.wheresyoured.at/hatersguide-privatecredit/

According to an article in BIS Quarterly Review published in March 2025, insurers account for 9.5% of private credit investors (with pension funds accounting for a terrifying 30.7%). That’s a lot. Collectively, it amounts to more than 40%. — It seems as though much of that insurer-provided funding is going to a relatively concentrated group of companies. According to analyst firm Oliver Wyman, insurers provided 43% of assets at the top-seven listed private credit firms in the Q3 2024 period. This figure is a steep jump from 32% in Q4 2021, and, when you calculate the difference between assets already held by private credit firms between those periods, means that more than half of all new capital going into private credit came from insurers.

The “risk” in this case is something that can be heavily gamed, such as when an asset manager owns an insurance company, allowing it to loan money to itself using its own funds and collect a management fee for the assets under management. For an example as to where this becomes a problem, per Nick Nemeth of Mispriced assets, 67% of Apollo’s management fees come from charging its own insurance affiliate Athene (which it merged with in 2022) for investing its money. And this blatantly-obvious conflict of interest is to blame for the culture shift. As I’ve hinted at previously, asset managers have been either buying stakes in or the entirety of life insurance and retirement funds and then taking their money for a joyride. Worse, the asset manager doesn’t even have to buy the whole insurance company. For example, Blackstone — who bought a minority stake in AIG (yes, that AIG)’s Life and Retirement Business for $2.2 billion in 2021 (though it’s now known as Corebridge Financial), allowing it to manage $50 billion in assets at first and then as much as $92.5 billion by 2027, charging management fees likely numbering in the hundreds of millions of dollars a year. Blackstone President Jon Gray also sits on the board of Corebridge.

There are a bunch of models for how private equity gains control over insurers, and the scariest part is that said private equity company doesn’t even need to take full ownership, or even a majority stake, for the transformation to happen, as I mentioned with Blackstone’s AIG (now Corebridge) deal. According to a 2023 paper from the International Monetary Fund called “Private Equity and Life Insurers,“ a private equity firm might buy a small (but strategically meaningful) slice of an insurance company, typically less than 10%. They will then enter into a “strategic alliance,” where the private equity firm starts directing their portfolio of the insurer.

Yet the most-egregious conflict of interest is that asset managers like KKR (Global Atlantic) and Apollo (Athene) have bought interests in insurance and retirement companies, taking their billions and investing them in AI data centers and software.

www.wheresyoured.at/hatersguide-privatecredit/

Anyway, the paper goes on to say more about why private credit gets used over bank financing — which is important (as I’ll get to later), it’s a comparatively more-expensive form of corporate borrowing: “[the] firm size is too small for bank syndication” Essentially, a company needs money, but the loan is too big for a bank to take on their own, but at the same time, it’s too small for it to be worthwhile working alongside other banks. “[the] firm has low amount of tangible assets as quality collateral” So a good reason not to lend somebody money! Great. Great. “due diligence is messy due to less clean financials or a lack of sophisticated internal systems.” …again, this is another reason to not lend somebody money. If their record-keeping is bad, or their financials look bad, that’s generally a good reason not to give them money. Thank god private credit is here to help!

The paper also notes that “all three of these reasons imply that private debt lenders believe they are better at evaluating or managing company cash flow risk than banks.” They’re not. Private credit’s default rates, according to a Fitch report published in February, have been consistently growing over the last few months. I’ll also note that UBS, the Swiss banking giant, expects that private credit default rates will double in 2026, ending the year in the 9-10% range, which, while bad, is still short of its “worst case estimate” of 14-15%.

By its own admission, private credit often lends to companies that can't get bank financing based on lax accounting, no or low collateral, and poor record-keeping.

As a result, default rates are high, and getting higher.

www.wheresyoured.at/hatersguide-privatecredit/

Yes, yes, that’s the first time I’ve used “sponsors.” Here’s how the paper defines it: The sponsors help with deal quality, with deal sourcing and in reducing information costs (through repeated interactions). These “sponsors” reduce the work that a private credit fund has to do, handling much of the due diligence that would otherwise take a lot of time and money to compete…or, at least, that’s what asset managers would say. A “sponsor” can be anyone from the holding entity — such as Blue Owl — or the private firm looking to do an acquisition. In the study, sponsors were used by both US and European private credit funds, but the key difference was that US companies relied upon them far, far more heavily than the European ones.

Here’s another worrying tidbit – 78% of American firms tended to prioritize backing private equity deals, with said private equity firms also acting as sponsors, meaning that private credit is lending money to private equity firms that act as the due diligence and, in some cases, the heavier parts of the underwriting. Put another way, PE firms are saying “hey, we’re buying this company and we think it’s great. Give us your money please. We promise it’ll be good,” and private credit says “sounds awesome, how does $10 billion sound?” And, because private equity is both the customer and the sales department for private credit, the latter has to keep on the former’s good side. Those deals are the way that asset management firms with private credit funds are able to invest all that insurance and pension money and, more importantly to them, collect management fees.

And because these are “riskier” loans, they have higher yields. Everybody’s happy, as long as nothing goes wrong, such as the company in question not being able to pay its debts. Again, quoting that paper: “Maintaining relationships with PE sponsors for a constant stream of deal flow, therefore, appears to be at least as important as the ability to self-originate a deal and particularly important for U.S. investors.” Don’t worry though. Private credit does some of its own due diligence, with the average lender spending 100 hours interrogating each deal that comes their way. A number that, as the paper notes, is “a similar order of magnitude to the due diligence reported by VC firms.” You know, the same venture capitalists that have an average TVPI (total value put in) between 0.8 and 2x since 2018. I feel better already!

Part of how private credit works is through sponsors - people who source deals and provide due diligence. And, most of the time, those sponsors are PE firms that private credit gets most of its business from - a clear conflict of interest.

www.wheresyoured.at/hatersguide-privatecredit/

For example, Hunterbrook recently found that venture debt specialist Hercules Capital — which has around 35% ($1.5 billion) of its portfolio in software debt — was taking increasingly-large amounts of income as “payment-in-kind”: A growing share of income is phantom. Income from a type of debt called payment-in-kind (PIK) loans doubled in two years to $55.9 million in 2025, while the actual cash collected on PIK loans collapsed 73% year over year to just $4.9 million. PIK loans enable borrowers to “pay” interest by adding debt, but the lender does not actually receive interest payments along the way: The outstanding PIK receivable at Hercules has nearly tripled in recent years to $109.1 million — interest that has never been paid in cash by borrowers.

Private credit is fundamentally dishonest, both in how it rates the quality of debt and how it takes loans in default and converts them to "payment-in-kind" loans that literally add the non-payment onto the balance of the loan and consider it income.

www.wheresyoured.at/hatersguide-privatecredit/

Now these very same asset managers are using their retirement and insurance arms to invest in AI data centers, dressing investments in risky, low-margin GPU warehouses in the trappings of “infrastructure” to obfuscate the associated risk. Per The Information, KKR has already invested money from insurance affiliate Global Atlantic in a debt offering for CyrusOne (the deal only references KKR itself), a company it acquired in 2022 alongside Blackstone’s Global Infrastructure Partners. The Information also reported that Blackstone’s credit and insurance arm funded part of the debt package for Oracle’s Stargate Wisconsin and Texas data centers, which are being built by Vantage Data Centers (owned by asset manager Silver Lake) for OpenAI, a customer that cannot afford to pay for the compute. Vantage had previously raised $6.4 billion in funding from Silver Lake and DigitalBridge in mid-2024 as part of DigitalBridge Partners Fund III, which is partially funded by the California Public Employees Retirement fund and multiple other retirement systems.

Private equity currently has 30,000 companies it can't sell or take public, leaving hundreds of billions of dollars of loans sitting in companies that may or may not be able to pay them, and have no exit route. This is a huge risk to those invested.
www.wheresyoured.at/hatersguide-privatecredit/

Private credit has sold itself as a reliable source of high-yield investments made to “trusted borrowers,” even as those “trusted borrowers” — like private equity firms — take private credit’s money and use it in leveraged buyouts that have, as I wrote a few weeks ago, stopped functioning as a reliable business model, as evidenced by the trillions of dollars of unsold (and functionally unsellable) companies sitting in PE funds. The companies in question immediately find themselves encumbered with expensive and onerous debt, and their new masters almost immediately gut them, making their products worse, firing a bunch of people and then expecting the company to keep growing. In reality, per a study from 2019, 20% of companies acquired through leveraged buyouts go bankrupt within 10 years, which makes it much harder for them to keep paying those expensive loans. At times, these companies are given “recurring revenue loans” that require them to hit certain revenue targets or otherwise be in breach of their loan. For example, in 2020, Pluralsight was acquired by Vista Equity Partners despite it never making a profit, taking on a $1.175 billion recurring revenue loan and a $100 million revolving credit facility. Four years later, Vista Equity Partners handed over control to its lenders including Blue Owl Capital, Ares, and BlackRock, who agreed to take equity positions in the company, in large part (per Axios) because of its inability to service its debt, leading to Vista Equity Partners writing off the entire investment.

Hundreds of billions of dollars of private credit debt have been and will be funneled into leveraged buyouts that are, in most cases, set up to fail, and by “fail,” I mean “the borrower will not actually pay their loans.” Despite risk being the very reason that the yields are so good, insurance and pension funds — as well as retail and institutional investors — are sinking their money into private credit firms with the expectation of reliable, stable returns, and while that’s worked for a while, I fear it won’t work long term.

Private Equity and Private Credit are closely linked, with private credit representing 70% of all PE funding in the last decade. This is very bad, as 30-40% of leveraged buyouts went to software companies in 2018-2022, at a time of mass-overvaluations.
www.wheresyoured.at/hatersguide-privatecredit/

Retirement and insurance funds depend on growth assets to continue making payments that are, as I’ve mentioned, often guaranteed. The demographic realities of an aging population that’s only getting older, while also living longer, and with fewer payments coming from working adults, means that growth is only becoming more important — and the sustainability of these funds depends on reaching higher and higher yields. Private credit has sold itself as a reliable source of high-yield investments made to “trusted borrowers,” even as those “trusted borrowers” — like private equity firms — take private credit’s money and use it in leveraged buyouts that have, as I wrote a few weeks ago, stopped functioning as a reliable business model, as evidenced by the trillions of dollars of unsold (and functionally unsellable) companies sitting in PE funds.

As I mentioned, insurers and pension funds need high-yield investments to keep making ongoing payments. Private credit funds market themselves using the language of banking, offering high yields and "manageable" risk that's far greater than they admit.
www.wheresyoured.at/hatersguide-privatecredit/

Private credit now accounts for 14% of all loans, nearly $1 trillion (around 16%) of all assets held by life insurance companies, and at least $100 billion — and potentially hundreds of billions — of assets held by retirement funds, with 17% of Arizona’s public safety personnel retirement system, 20% of two unnamed Kentucky pension systems, and 10% of the State Teachers Retirement System of Ohio invested, per Reuters in a story about how pension funds were “sticking by” private credit that i’ll talk about later. The IMF thinks things are a little grimmer, estimating that private credit now accounts for about 35% of the investment portfolios of North American insurance companies, with the biggest portion tied to commercial real estate (a collapsing industry) followed by private placements (read: loans). To give you an example of specific exposure, the California State Teacher’s Retirement System is the biggest investor in Blue Owl’s publicly-traded Blue Owl Capital Corporation fund. It doesn’t really have a choice, with a dwindling number of other options for reliable yields and, I imagine, some degree of fear that any attempt to disconnect from private credit could cause an industry-wide panic.

The finance industry is currently in full court press trying to convince you that the private credit bubble won’t spark the next great financial crisis in an attempt to distract from the fact that major banks have at least $100 billion in exposure to private credit firms, with Wells Fargo siting at around $36 billion, Citigroup at $22 billion, and Bank of America at $20 billion. Some estimates say it might be as high as $180 billion. Moody’s estimates that banks’ true exposure to private credit vehicles reached $1.4 trillion as of end-2025.

Private credit now accounts for 14% of all loans - and the money for those loans is increasingly coming from you, via both private and public retirement accounts and insurance premiums.

And, of course, hundreds of billions from the banks.

www.wheresyoured.at/hatersguide-privatecredit/

“Private Credit” is an immense bucket for a very simple concept — non-banking institutions lending out money. A “private credit firm” can refer to an “alternative asset manager” that invests in things like real estate, hedge funds and infrastructure projects (such as Blackstone, Ares or Blue Owl), or direct lenders like HPS or (mentioned above) OakTree Capital, which are often owned by larger alternative asset managers (like Brookfield or BlackRock). As Marks recalled, in the aftermath of the great financial crisis, banks were risk-averse and newly-regulated thanks to Dodd-Frank and the Basel III frameworks that required them to have certain amounts of assets, meaning that the loans that banks were making had to provide a much higher return, which led to much higher rates, which cut their appetite along with the ass-kicking they’d received thanks to their manifold fuckups around mortgage-backed securities. A few years later in 2013, regulators created new lending guidelines that would flag any loan above 600% of EBITDA (earnings before interest, taxes, depreciation, and amortization) for scrutiny by a bank’s regulatory examiner, which could lead to it being flagged as a “special mention,” requiring more reserves to be held against it. Enough of those start a conversation with said regulator about the quality of the bank’s credit, creating a sort of invisible ceiling for loans at around 600% of a company’s (EBITDA) earnings.

Thankfully, the world had a hero: private credit. Instead of those stinky, nasty requirements involving the annoying regulators’ “CAMELS system” that rudely grades the health of a bank based on things like “liquidity” and “risk,” private credit was able to lend in whatever way (or to whomever) it wanted, including how much a company can borrow (its leverage vs its earnings), the interest rates of the loan, and, worryingly, the value that the private credit fund gives a loan. In practice this means a loan to a company that was doing gangbusters in 2021 but is currently struggling to grow is worth exactly the same amount as long as it doesn’t miss a payment and a private credit fund can say “looks good to me based on my industry analysis!”

Private credit grew from the zero-interest rate environment after the global financial crisis, leaving insurance and pension funds unable to use treasury bonds for yield. Private credit filled the void with high-yield, high-risk lending.

www.wheresyoured.at/hatersguide-privatecredit/

Things were going great for private credit for the longest time, but late last year, some buzzkills at the Financial Times discovered that auto parts manufacturer First Brands and subprime auto loan company Tricolor had taken on billions of dollars of loans under dodgy circumstances, double-pledging collateral (IE: giving the same stuff as collateral on different loans) and outright falsifying lending documents, allowing the both of them to borrow upwards of $10 billion from private credit firms, including billions from North Carolina-based firm Onset Capital, which nearly collapsed but was eventually rescued by Silver Point Capital. After the collapse of First Brands and Tricolor, JP Morgan’s Jamie Dimon said that “when you see cockroaches, there are probably more,” the kind of sinister quote baked specifically to lead off a movie about a financial crisis.

Seemingly inspired to start freaking people out, on November 5, software-focused asset manager Blue Owl announced it would merge its publicly-traded OBDC fund with its privately-traded OBDC II fund, and, well, it didn’t go well, per my Hater’s Guide To Private Equity: Blue Owl tried to merge a private fund (OBDC II, which allowed quarterly payouts) into another, publicly-traded fund (OBDC), but OBDC II’s value (as judged by Blue Owl itself) was 20% lower than that of OBDC, all to try and hide what are clearly problems with the economics of the fund itself. The FT has a great story about it. Two weeks later on November 18 2025, Blue Owl said it would freeze redemptions on OBDC II until after the merger closed, then canceled it a day later citing “market conditions.” Two months later in February 2026, Blue Owl would announce that it was permanently halting redemptions from OBDC II, and sold $1.4 billion in assets from both OBDC II and two other funds. The buyers of the assets? Several large pension funds that had a vested interest in keeping the value of the assets high, and Kuvare, an insurance company with $20 billion of assets under management that Blue Owl bought in 2024. This is perfectly legal, extremely normal, and very good.

The larger software industry is in decline, with a McKinsey study of 116 public software companies with over $500 million in revenue from 2024 showing that growth efficiency had halved since 2021 as sales and marketing spend exploded, and BDO’s annual SaaS report from 2025 saying that SaaS company growth ranged from flat to active declines, which is why there’s now $46.9 billion in distressed software loans as of February 2026. And to be clear, it’s not just private equity’s victims that are taking out loans. Over $62 billion in venture debt was issued in 2025, with established companies like Databricks ($5.2 billion in credit per the Wall Street Journal in 2024) and Dropbox ($2.7 billion from Blackstone in 2025) raising debt just as the overall software industry slows, with AI failing to pick up the pace. This is a big fucking problem for private credit. Per the Wall Street Journal, asset managers are massively exposed to software companies, and have deliberately mislabeled some assets (such as saying a healthcare software company is just a “healthcare company”) to obfuscate the scale of the problem:

Private credit is the wild west of finance, underwriting and valuing companies based on entirely-unregulated private models. The cracks have shown as dodgy firms like First Brands were able to take out billions in loans using questionable documents.
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A few years ago, I made the mistake of filling out a form to look into a business loan, one that I never ended up getting. Since then I receive no less than three texts a day offering me lines of credit ranging from $150,000 to as much as $10 million, each one boasting about how quickly they could fund me and how easy said funding would be. Some claim that they’ve been “looking over my file” (I’ve never provided any actual information), others say that they’re “already talking to underwriting,” and some straight up say that they can get me the money in the next 24 hours. Some of the texts begin with a name (“Hey Ed, It’s Zack”) or sternly say “Edward, it’s time to raise capital.” Others cut straight to the chase and tell me that they have been “arranged for five hundred and fourty (sic) thousand,” and others send the entire terms of a loan that I assume will be harder to get than responding “yes.” While many of them are obvious, blatant scams, others lead to complaint-filled Better Business Bureau pages that show that, somehow, these entities have sent them real money, albeit under terms that piss off their customers and occasionally lead to them getting sued by the government. That’s because right now, anybody with the right lawyers, accountants and financial backing can create their own fund and start issuing loans to virtually anyone they deem worthy. And while they’ll all say that they use “industry-standard” underwriting, no regulatory standard exists. This, my friends, is the world of private credit — a giant, barely-regulated time bomb of indeterminate (but most certainly trillions of dollars ) size that has become a load-bearing pillar of pensions and insurance funds, and according to Federal Reserve data, private credit has borrowed around $300 billion (as of 2023) from big banks, representing around 14% of their total loans.

Private credit is a non-banking lender - usually a fund connected to an asset manager, but really anyone with the right lawyers and accountants. 14% of all big bank loans have gone to private credit.

I find it far scarier than the AI bubble.

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Premium: The Hater's Guide to Private Credit A few years ago, I made the mistake of filling out a form to look into a business loan, one that I never ended up getting. Since then I receive no less than three texts a day offering me lines of cred...

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