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History

Private credit was born from the ashes of the Great Financial Crisis. In the aftermath of that debacle, regulators moved to limit the risks banks could take. Loans deemed too risky were no longer being originated by commercial banks. To fill that void, non-bank lenders stepped in, creating what is known as private debt or direct lending market. You may know these vehicles as Private credit funds, also referred to as business development companies (BDCs). These funds raised capital from pensions, endowments, insurance companies, and wealthy individuals.

Unlike junk bonds or corporate bonds, these loans are not publicly traded and are typically held to maturity. In fact Private credit has quietly taken a big chunk of market share from the traditional junk bond market. These private deals give borrowers speed, confidentiality, and customized terms they can’t always get from public bonds, while investors get higher yields and perceived lower volatility. The public junk bond market has actually improved in average credit quality as the riskier companies moved into these opaque structures.

The funds have traditionally targeted middle-market companies with revenues between $10 million and $1 billion, though the strategy has recently expanded to larger firms and bigger deals, including those in AI. Last November Morgan Stanley estimated that of the $1.5 trillion in external financing needs for the projected AI datacenter buildout that as much as 50% could be funded by Private credit (hold that thought).

One notable drawback of private credit funds is their high degree of opacity also called a lack of transparency. These funds disclose limited information about their loans and mark their own books, which can potentially mask deterioration in the portfolio. Because of the illiquid nature of these assets and the lack of a public trading market, the investments are inherently illiquid and often include gating provisions should too many investors want their money back at the same time.

Growth

The industry started the way any small new industry does: by filling a niche need. The fee structure, while lower than that of private equity, remained extremely attractive to managers, with total effective fees often running from 3% to 4% of NAV. The pitch to investors was straightforward: higher yields than public bonds and lower reported volatility because there is no daily mark-to-market. The risks, of course, are illiquidity and higher default rates in a recession (hold that thought).

Bottom line: The fat fee structure attracted many firms to get into this business and the Wall Street sales machine was engaged, went into action and the money flowed into these firms.

The Last Two Years of Growth

The industry itself is not nefarious, but like all credit markets, it is prone to excesses at the end of a cycle. Growth in assets under management (AUM) over the last two years (2024 & 2025) has been estimated at 50% to 75%. The entire category is now estimated to stand between $2.5 trillion and $3 trillion in AUM. When you examine credit creation across the broader banking system over that same period, most of the incremental loan growth in the economy flowed to these non-bank institutions from commercial banks (See chart below).

Source: Phinance Technologies US Economy Outlook 2026

The key question investors should ask is: With this explosive growth in AUM and competition for loans in the industry, have the funds found enough creditworthy borrowers in an already high-risk category, or rather did the inflows chase incrementally “junkier” credits with looser loan covenants?

Trouble in Paradise

Starting in the fourth quarter of last year, several high-profile Private credit bankruptcies emerged, most notably First Brands and Tri-Color Auto. Questions about the structure of Private credit funds began to surface, particularly around opacity and illiquidity. This led to investor redemptions and the gating of several prominent funds in Q1, including those from BlackRock, Blackstone, Apollo, Cliffwater, Blue Owl, and others. The pressure continued into Q2, with redemption requests accelerating across these major platforms. The problem is not improving, rather it is getting worse.

Implications

Effectively, the Private credit markets are now shut down and at best stalled. They are in redemption mode which could ultimately lead to liquidation mode at subpar pricing. While some new loans may still be originated, the market as a whole has slowed dramatically. As noted previously, we saw that the marginal credit creation of the past two years in the US economy has come from an industry known for being opaque and illiquid…and that driver of credit is now in question. The critical questions are: how large are the losses, how long will this downturn in private credit last, and what will recovery rates look like? PIMCO (one of the largest fixed income investors) has recently stated that the credit default cycle has begun and that losses will be higher than expected, with clear implications for the broader economy.

To make matters worse the lack of transparency and public quotes make determining what is going on in these funds extremely difficult for the capital markets to assess other than the fact that we are seeing outflows from the sector. The investors have unanswered questions and are like mushrooms growing in the dark on manure.

Private credit woes may also have implications for the commercial banking system. I mentioned above that most of the credit creation from commercial banks in 2024 & 2025 was Private credit and Private equity. Private credit funds rely on bank credit lines (subscription lines, NAV facilities, revolvers) for liquidity and leverage. These have grown rapidly with contingent liquidity to Non-Depositary Financial Institutions (NDFIs) standing at approximately $2.3 trillion overall, with Private credit market share rising over the last few years. Simultaneous drawdowns from credit stress in Private credit could transmit shocks to bank balance sheets. I don’t believe it’s a systemic problem yet but it bears watching. At a minimum it would likely curtail commercial bank enthusiasm for overall credit creation in the economy (i.e. consumer loans, commercial & industrial loans and real estate loans).

Earlier I told you to hold two thoughts in your head. First that AI funding datacenter buildout was contingent on the Private credit market to fund 50% of the external financing, and secondly, the default rates in Private credit would be higher in a recession as advertised initially by the industry. Given that flows in the Private credit industry are going the wrong way, and the industry is effectively paused…I don’t see how AI data center build out will be funded by Private credit in the near term, and secondly I believe the industry’s recession default assumptions are about to be tested very soon and could be higher than expectations.

Conclusion

Credit is the lifeblood of economic activity, and recently a great deal of it has flowed through this new channel. Significant losses have yet to be fully recognized, and they will ultimately hit pension funds, insurers, asset managers, and wealthy individuals who hold these investments. The commercial banks also have exposure to this market and losses in this sector could lead to a broader credit contraction. And finally, AI financing could become prohibitively expensive and pause or dramatically slow the capital expenditure cycle, affecting what has now become about 45% of the S&P 500’s market capitalization.

I believe the feedback loops are already underway and are likely to spread to the economy and eventually the equity markets.

P.S. If you are interested in a much deeper nitty gritty dive into Private credit markets and the risks check out the Unicus Investor on Substack:

The Unicus Investor

BLACKSTONE'S BCRED: Earned $0.54. Paid $0.60. Cut to $0.54. - THE BIG READ

On April 8, 2026, we published Blackstone’s Defense of Private Credit. There is a Problem with Its Defense. In it, Blackstone argued that concerns about BDCs are overblown, that credit quality is resilient, that the semi-liquid structure works as designed, and that software exposure is well protected…

Read more

10 days ago · 18 likes · Unicus Research

Disclosure: I have no financial relationship with Unicus…I just think they do good work.

“Be careful that you do not forget the Lord your God... Otherwise, when you eat and are satisfied, when you build fine houses and settle in them, and when your herds and flocks grow large and your silver and gold increase and all you have is multiplied, then your heart will become proud and you will forget the Lord your God...” Deuteronomy 8:11-14

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Over the last several years I have been posting nonstop on X about the same nightmares we’ve been living through…the COVID psyop, the experimental mRNA shots, the mandates that destroyed lives, the injuries, the excess deaths, and the relentless propaganda machine that tried to silence anyone who noticed the bodies piling up. I have watched it all in real time: the fear porn, the goalpost moving, the “safe and effective” lies repeated like gospel while real-world data told a different story.

Now we have fresh, documented revelations that should have blown the lid off of everything. Instead? Crickets from the media and, more disappointingly, from the current administration that promised accountability.

Senator Ron Johnson dropped another devastating report and hearing in late April 2026: “Unmasked: How Biden Health Officials Purposely Turned a Blind Eye Toward COVID-19 Vaccine Safety Signals.” Internal records show FDA officials knew their VAERS monitoring was inadequate to say least. They had better data-mining tools ready to flag clear safety signals: cardiac deaths, strokes, pulmonary issues, Bell’s palsy but they chose not to use them. Why? To avoid “vaccine hesitancy.”

This was not screw-up territory. It was deliberate. Vaccine-injured people sat across from Peter Marks and other top FDA brass begging for acknowledgment. They got stonewalled. Johnson rightly calls this one of the biggest scandals in his decades in public service. Then in early June he held another hearing exposing potential cancer links to the mRNA shots and the systematic suppression of critical studies. Same playbook: inconvenient science gets buried or attacked.

Around the same time, Tulsi Gabbard, in one of her final moves as DNI, declassified documents laying out Fauci’s role in funding gain-of-function research at Wuhan, the lab-leak cover-up, the intelligence manipulation, and the retaliation against truth-tellers. Millions of taxpayer dollars funneled into risky biolabs, followed by the full narrative-control machine kicking in to blame nature instead of the obvious.

These are not anonymous X threads. This is a sitting Senator with subpoena power and the former Director of National Intelligence dropping official records.

So where is the firestorm? Where are the front-page exposés, the prime-time specials, the demands for real hearings and prosecutions? In 1976 the swine flu vaccine was pulled after 25 deaths and 500 cases of Guillain Barre Syndrome. In the covid shot era we have approximately 39,000 deaths reported to VAERS following the shot. Apparently lives got cheaper over the last 50 years. The legacy media has mostly ignored it, downplayed it, or run the usual “right-wing conspiracy” dismissals. Paid to lie… and crickets on recent FDA COVID vax revelations. Their complicity is not an understatement, rather it was essential to the entire psyop.

Even more frustrating is the relative silence from the current Trump administration. After years of vowing to expose the lies and drain the swamp on the pandemic response, these revelations land and… not much follow-through. No aggressive push for accountability. No sustained public reckoning for the officials who covered up safety signals or manipulated the origins story. That silence hits hard. Additionally the vaccines are still on the market and this administration is now complicit. What an epic failure!

A lot of us did not need Johnson’s reports or Gabbard’s declassifications to see the fraud. Back in 2022 and 2023, my team at Phinance Technologies was already digging into the data and uncovering the real narrative through our Humanity Projects. We analyzed excess deaths, disability surges, absence rates, and the human and economic costs of mass inoculations when almost no one else wanted to touch it. Check out the full body of work here: Humanity Projects

What we found through cold, hard numbers lined up with what the bodies on the ground were showing. We weren’t surprised by the latest revelations from Senator Johnson. We had been sounding the alarm years earlier, while getting labeled conspiracy theorists for it.

We watched the institutionally well-established benefits of natural immunity get summarily dismissed and memory holed. We saw “two weeks to flatten the curve” turn into endless boosters for the compliant and job losses for the unvaccinated. We saw friends and family injured or worse, then told it was “rare,” “coincidence,” or “misinformation.” Those of us who protested the mandates and the experimental mRNA shots were labeled Russian disinformation, dangerous spreaders, even domestic terrorists. It did not stick, but they tried.

For those who saw through the propaganda early, resisted it, and watched peers fall for it our worldview has forever changed. The greatest cover-up ever. But despite the MSM blackout, word has gotten out through underground channels, thanks in no small part to Senator Ron Johnson and others who refused to let subject die.

The betrayal runs deep. These new revelations do not surprise us but rather they confirm what the data and our own eyes showed years ago. They lied. They knew they were lying. They censored, gaslit, and destroyed lives to protect the narrative. Many institutions including public health, intelligence, media, Big Pharma were all in on it and still propagating the lies today.

That loss of trust is profound and permanent for millions of us. We no longer default to believing official statements. We demand primary data. We assume self-preservation and narrative control from authorities until proven otherwise. The COVID era did not just damage credibility on one issue instead it shattered how an entire group of people view government, “experts,” and authority. “Doing your own research” proved to be a critical lifesaver.

The people in authority still defending the garbage jab or pretending none of this matters can keep taking their 12 boosters (dirty little secret… they are not). The rest of us are done. We are profoundly changed. More skeptical. More data driven. Less willing to comply. Team Humanity was born out of this mess.

The window for real accountability is slamming shut. Even if these official revelations get memory-holed, the lesson is clear: they never planned to come clean. They want us to forget and move on to the next crisis.

I am not forgetting. And from what I see every day, millions are not either. As time rolls forward and the cognitive dissonance of those who took the vaccine wears off…our numbers will continue to grow.

“For nothing is hidden that will not be made manifest, nor is anything secret that will not be known and come to light.” — Luke 8:17

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If you have followed my work on X (@DowdEdward), listened to the podcasts, or read “Cause Unknown”: The Epidemic of Sudden Death in 2021 and 2022, you already know where I am coming from. I spent years on Wall Street running a $14 billion equity growth fund at BlackRock. What started out as digging into excess mortality and sudden deaths after the COVID rollout, turned into a broader mission: separating signal from noise on the biggest issues shaping our lives right now.

This Substack is the next step. It is a place for clear-eyed analysis without the filters, spin, or institutional constraints where we can exchange ideas together. I am going beyond the narrative on four core themes that matter:

· COVID Truth: The excess deaths, the disability spikes, the cancers in younger people, and what the official data actually shows versus what we are told. At my company, Phinance Technologies, we have been tracking this since day one. The numbers do not lie, even when the institutions try to bury them.

· Finance and the Economy: Macro reality checks. Credit cycles, debt, inflation signals, recession risks, capital flows, and what it all means for your wallet and the markets.

· Politics and Culture: The stories we are sold about power, institutions, and “progress.” Who benefits, who pays, and what the real incentives are. No sacred cows.

· Healthy Mindset: Truth is the ultimate health hack. Once you stop swallowing the official line and start looking at reality with your own eyes, everything else improves including your decisions, your resilience, your ability to navigate whatever comes next. I have been through my own battles and come out the other side stronger. This is not woo-woo; it is data-driven clarity.

Here’s how it works:

Free subscribers get the core articles, regular updates, and the main written analysis. That is the foundation…solid, no-BS takes you can share and reference.

Paid subscribers (@$8/month) get the premium layer: video analysis of breaking events as they unfold, plus my raw, initial takes before they get polished or filtered for wider audiences. Think first-draft thoughts, unscripted breakdowns, and deeper dives into the data that do not always make it into public posts. It is the stuff I used to keep closer to the vest because of potential censorship. You will also get priority access to certain offerings.

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Why am I doing this now?

The narratives are cracking faster than ever, and the gap between what the data says and what we are fed is widening. Whether it is economic “soft landings,” health statistics, cultural stories, unbridled migration and demographic generational conflicts…the people in charge keep getting surprised by reality. I am not here to predict every twist rather I am here to give you the tools and the perspective, so you are not surprised.

This is not another echo chamber but rather a place for people with an open mind. This Substack is for those who are tired of being gaslit by institutions that have lost the plot. Investors, parents, professionals, and general skeptics/truth seekers want to understand what is actually happening so they can make better decisions for themselves and their families. If any of this resonates with you, hit the Subscribe button and share this Substack with people you care about who need to see beyond the noise.

The more of us who operate from reality instead of the propagandized establishment script, the better off we will all be. I’m excited to kick this off. I hope you are too. Thanks for being here. Feel free to suggest topics of interest in the comment section.

Ed Dowd

Independent analyst, Maui-based numbers guy who still calls it like he sees it.

P.S. My website eddowd.com has my most recent interviews and ability to schedule one-on-one conversations.