Morgan Stanley: Private credit market expected to enter default cycle this year.

Analysts at Morgan Stanley wrote in a report that the private credit industry may enter a default cycle, with an expected annual default rate of about 8% for private credit from the second half of this year to the first half of 2027, while the annual default rate for syndicated loans is expected to be around 5.5%. These analysts wrote that these defaults may be concentrated in software loans and lean towards distressed debt exchanges. They also wrote that such a cycle could result in poor returns and continue to dampen growth in asset under management until next year. The performance of the syndicated loan market may outperform private credit, which may stagnate or even slightly shrink this year.