Wealth managers still keeping an eye on private credit mess as Iran war roils market

Despite all the news coming from the Middle East, wealth managers still need to keep a close eye on the unrest happening in the private credit arena.

Asset manager BlackRock, for example, recently wrote down to zero a $25 million private loan to Infinite Commercial Holdings as it reported during BlackRock TPC Corp.’s Q4 earnings report on February 27, 2026. Elsewhere, Blackstone recently disclosed record redemption requests from its $82 billion Blackstone Private Credit Fund, or BCRED, while Blue Owl decided last month to halt regular redemptions at one of its flagship retail‑oriented private credit vehicles.

The KBW Nasdaq Bank Index is down 20% in the past month, reflecting investor anxiety about banks’ indirect exposure to private credit. 

All these blow-ups, redemptions and write-downs have investors wondering if the asset class – often pushed by advisors as a low-risk, high-yielding portfolio diversifier - is right for them.

So how are advisors currently thinking about allocations to private credit in the wake of this rocky period?

Austin Graff, chief investment officer at 49 Financial, for one, currently views private credit as an opportunity primarily for those who do not need liquidity in the near term. In his view, the illiquidity premium can be meaningful, but it is important to recognize that there are additional risks in the asset class, particularly related to the opacity of marks. Because of that, he focuses heavily on manager selection.

“In our view, the market is currently facing some growing pains driven by two main issues. First, there has been an overconcentration in software lending based on ARR metrics, which can be vulnerable if growth slows. Second, there have been instances of fraud tied to poor underwriting and inadequate monitoring of investments,” Graff said.

He says he also remains mindful of elevated valuations in the private equity and venture markets, which can create risk for private credit lenders. If underlying companies are purchased at aggressive valuations, the capital structures supporting those deals can become more fragile during economic stress.

“Like many trendy markets, private credit has at times pushed too far into areas that looked attractive in the moment. Our approach is to focus on more stable opportunities rather than chasing the latest theme,” Graff said.

Elsewhere, Sam Diarbakerly, founder and private wealth advisor at Generation Capital Advisors, does not believe private credit is inherently good or bad. He sees it as an “investment tool, and like any tool, it's only appropriate when deployed by someone who understands what they're holding.”

The challenge isn't the asset class itself, according to Diarbakerly, it's that most retail clients see a 9% or 10% coupon and miss the liquidity constraints and credit concentration beneath it. Most advisors don't fully understand these products either in his opinion, which is where real risk emerges.

“BDCs and interval funds can be legitimate tools, but clients need to understand what liquidity actually means. Many funds promise quarterly redemptions, but the fine print reveals gates, side pockets, and suspension clauses that matter when you need the cash. Our job as advisors is to spell that out plainly,” Diarbakerly said.

Moving on, Patrick McGowan, managing director and head of alternative investments at Sanctuary Wealth, points out that private credit has grown into a roughly $2 trillion market over the past decade projected to reach $4 trillion by 2030, with direct lenders filling the void of banks after Dodd-Frank passed. And he continues to believe that private debt should play a role in a diversified portfolio given its attractive and consistent pattern of returns.

While he does not believe there is significant cause for immediate concern, he is stress testing portfolios by considering different default, recovery rate, and leverage scenarios to understand realized loss potential. Right now he is cautiously monitoring older portfolios that are weighted toward legacy loans as fourth-quarter SEC filings are released, particularly watching non-accruals, ROE and PIK utilization, which are leading indicators or credit issues.

“In short, no, recent developments haven’t changed our view on the asset class, as last year we cautioned about loans originated amid the exuberance of 2021, where non-accruals were rising. There are real reasons for caution, as valuation assumptions often were based solely on cashflow forecasts, rather than tangible collateral, which are being tested by shifting fundamentals and accelerating AI disruption. However, we believe these risks are being dramatically overstated,” McGowan said.