[Week 33 of 2026] Marks and Markups

Welcome back to Price and Prejudice with a few musings from Week 33 of 2026.

Deciding Defaults

This WSJ analysis of quarterly reports from the big direct lenders is worth reading compared to what the managers are saying. Apparently, defaults at funds run by Ares, Blackstone, Blue Owl and Golub touched their highest level since at least 2021, but also Blue Owl's co-CEO told analysts that "across our direct lending strategy, credit health remains strong." Part of this is probably because the manager has some discretion on important details like whether a loan is non-accruing and what the loan is worth. The lack of a price means you have to rely on other signals, so naturally one ends up wondering how trustworthy these extra signals are.

The tough part, unlike regular corporate defaults, is that we cannot see where any of this ends up. Private credit is not a closed loop with wealthy individuals at one end and mid-market borrowers at the other. Instead, banks lend to the direct lenders through subscription lines and NAV facilities, so exposure that left bank balance sheets as loans has come back as credit to the lenders. Insurers are also now among the largest funders, which means the solvency of an annuity book depends in part on marks that a manager sets. In addition to this, you have the same private equity sponsors sit on both sides of many of these deals. Add to that the fact that the loans are not independent draws (e.g. software is 20% or more of many portfolios). To say anything about financial stability, you need to do a careful accounting exercise of adding up exposures across banks, insurers, BDCs and retail wrappers. Hopefully someone will figure out how to do this sooner rather than later.

Pitching AI to Family Offices

According to this article, roughly 65% of family offices say AI investing is a priority. At the same time, more than half report no exposure to growth equity or venture capital, and 79% have no allocation to infrastructure. So they want the theme but seem to lack the vehicles that can deliver said exposure. The way in has thus become special purpose vehicles offering access to SpaceX, Anthropic and OpenAI, often layered with hefty fees.

I guess it is worth being fair to the SPV before criticizing its structure. A family office is wealthy enough to be a target for every placement agent in the market and small enough to be a price taker once it gets there. It is also probably a hassle, since a fund commitment is a blind pool, featuring thirty companies picked by someone else, a ten-year lock, and capital calls arriving on the general partner's schedule rather than yours. You also don't have the capacity to monitor the many portfolio companies within a single fund or the managers themselves, so probably the trade-off works in your favor.

Podcasts

• A Columbia business school grad was on a podcast recently to discuss "optimizing life and finances."