NEW YORK — Private credit has endured one of its toughest years in more than a decade, with billions of dollars in withdrawal requests, fears over opaque valuations and growing anxiety that artificial intelligence could damage heavily indebted software companies.
Yet investors are apparently not abandoning alternative investments.
According to Goldman Sachs Asset Management, demand for private markets remains surprisingly resilient even after a string of private-credit problems rattled Wall Street in 2026.
A Goldman survey cited by CNBC found that 93% of investors who already own alternative investments remain satisfied with them, while 97% said their alternatives had performed either in line with or better than expectations.
Even among investors aware of the negative private-credit headlines, 56% said the turmoil had not changed their overall view of alternatives.
Another 30% said they had become more cautious.
Just 14% said the headlines actually made them more positive.
That distinction could become one of the most important stories in asset management:
Investors may be nervous about some private-credit funds — but they still want private equity, infrastructure, real estate, secondaries and other assets outside traditional public stocks and bonds.
Private Credit’s Trouble Is Real
The optimism does not mean the problems are imaginary.
Private credit has expanded dramatically since the global financial crisis as asset managers increasingly replaced banks in lending directly to companies.
The appeal was powerful.
Investors received yields that were often higher than those available in traditional bonds, while borrowers gained access to financing with more flexibility and less public disclosure.
But 2026 exposed several weaknesses in the model.
One of the biggest flashpoints has been investor withdrawals from semi-liquid private-credit funds, particularly products marketed to wealthy individuals.
Blue Owl Capital became the most visible example.
In the third quarter, investors requested approximately $4.2 billion in withdrawals from two major Blue Owl credit funds, according to Reuters.
That was down from $4.7 billion in the second quarter and $5.4 billion during the first quarter, suggesting that redemption pressure may have peaked.
But the numbers remain enormous.
Blue Owl’s flagship Credit Income Corp. received withdrawal requests equal to roughly 16.8% of its shares, while its technology-focused private-credit fund faced requests amounting to approximately 39%.
The funds generally limit quarterly redemptions to around 5%, meaning many investors could not immediately withdraw everything they requested.
Software Loans Became the Market’s Biggest Anxiety
Much of the concern centers on one sector:
software.
Private-credit firms poured enormous amounts of money into software companies during the cheap-money years, often financing private-equity buyouts at relatively high leverage.
Then generative AI arrived.
Investors began questioning whether some software businesses could lose customers, pricing power or entire product categories to artificial-intelligence tools.
That created an unusual risk for lenders.
Companies that once appeared to generate predictable recurring subscription revenue suddenly faced questions about whether their business models could be disrupted much faster than lenders expected.
Goldman Sachs itself acknowledged earlier this year that private credit had come under pressure because of high-profile defaults, concerns over valuations and significant exposure to software companies potentially vulnerable to AI disruption.
But Goldman has also argued that the weakness is concentrated rather than systemic.
The firm has said that default rates in many segments of private credit remain around 2% or below, far beneath levels exceeding 10% seen during severe previous credit cycles.
Goldman’s Own Fund Shows the Difference
Goldman’s own private-credit business provides an interesting contrast.
Its Goldman Sachs Private Credit Corp. reported redemption requests equal to only about 2.03% of outstanding shares in the third quarter.
Because that figure was below its 5% quarterly repurchase limit, the fund said it could fulfill all requests.
At the same time, it attracted approximately $400 million of new gross inflows during the quarter.
The fund had about $9.2 billion in net asset value as of June 30.
Those numbers illustrate an increasingly important divide.
Investors may not be rejecting private credit altogether.
They may simply be becoming far more selective about:
which manager they trust,
which borrowers they finance,
how much liquidity a fund promises,
and how transparent its valuations are.
That could favor the largest and most established alternative-asset managers.
Investors Still Want Alternatives
Goldman’s wider argument goes beyond private credit.
Alternative investments include a much broader universe:
private equity,
infrastructure,
real estate,
private credit,
growth equity,
hedge funds,
secondaries,
and other assets that do not trade like ordinary listed stocks and bonds.
Goldman estimates that individual investors allocated about $4 trillion to private markets during the past decade.
That figure could rise to approximately $12 trillion over the next 10 years, according to the firm’s projections.
If that happens, alternatives will move much further beyond pension funds, endowments and sovereign wealth funds and into the portfolios of affluent individuals.
Asset managers desperately want access to that pool of capital.
Infrastructure Is Attracting Billions
One reason alternatives remain appealing is that the category contains assets that look very different from troubled corporate loans.
Infrastructure is a major example.
In June, Goldman Sachs Alternatives announced that it raised more than $3 billion at the first close of its West Street Infrastructure Partners V fund.
That represented approximately 75% of its $4 billion fundraising target in less than six months.
Around 80% of the initial commitments came from investors who had backed earlier versions of the strategy.
Investors included sovereign wealth funds, pension plans and insurance companies across North America, Europe, Asia and the Middle East.
Infrastructure has become especially attractive because global spending requirements are enormous.
Artificial-intelligence data centers require electricity.
Power grids require expansion.
Countries are rebuilding transportation systems.
Governments and corporations are spending heavily on energy security and digital infrastructure.
That gives private-market investors exposure to long-term investment themes that are difficult to capture through traditional bonds alone.
Even European Private Credit Is Still Growing
Private credit itself continues attracting money in some regions.
Goldman said in September that its evergreen European private-credit strategy had surpassed $10 billion in total assets.
The strategy launched only in October 2023.
It sits inside Goldman’s broader $230 billion credit-alternatives business.
Again, that suggests the market is not experiencing a universal investor exodus.
Instead, capital is moving toward areas perceived as better diversified, more conservatively underwritten or managed by established firms.
Investors Are Becoming Much More Selective
That trend extends across private markets.
Data compiled by investment consultant NEPC showed that U.S. private-equity managers raised approximately $159.6 billion across 178 funds during the first half of 2026.
But capital was heavily concentrated among established firms.
Experienced managers raised approximately $139.3 billion, nearly seven times the $20.3 billion collected by emerging managers.
Funds below $1 billion captured only about 16.7% of commitments.
Evergreen and semi-liquid vehicles, meanwhile, remained among the fastest-growing structures.
In other words:
Investors still want alternatives.
They are simply becoming much less willing to hand money to everyone.
There Is a Liquidity Problem Investors Cannot Ignore
The private-credit turmoil has also exposed one fundamental contradiction.
The underlying loans are often illiquid.
But some funds offer investors periodic opportunities to withdraw their money.
That works reasonably well when only a small number of investors request cash.
It becomes much harder when everyone asks at once.
Private-credit managers therefore typically cap quarterly repurchases, often near 5%.
Those limits are designed to prevent funds from having to dump illiquid loans at distressed prices simply to meet withdrawals.
But investors sometimes discover the restriction only when they actually want their money back.
Blue Owl took the issue further earlier this year by changing the redemption structure of one retail-focused vehicle and returning capital gradually through asset sales and repayments.
The episode intensified debate over whether investors fully understood the difference between a semi-liquid investment product and a genuinely liquid one.
Regulators Are Paying Attention
The sector’s enormous growth has also attracted regulators.
According to Semafor, the Federal Reserve Bank of New York has been examining major banks’ exposure to private-credit firms, including their lending arrangements, collateral and risk-management practices.
The review reportedly involved banks including JPMorgan, Wells Fargo, Barclays and Morgan Stanley.
The scrutiny followed concerns about private-credit portfolios, particularly software loans exposed to possible AI disruption.
That matters because private credit increasingly interacts with traditional banks.
Even if the loans themselves sit outside the banking system, private-credit managers borrow from banks, use financing facilities and transact through traditional financial institutions.
A large enough disruption could therefore spread beyond private funds.
Goldman Does Not See a 2008-Style Crisis
Goldman executives have repeatedly argued that comparisons with the global financial crisis are overdone.
The firm says private-credit funds generally have better-matched assets and liabilities than banks.
They also typically operate with lower leverage than highly leveraged financial institutions did before 2008.
Goldman private-credit executives have argued that the market therefore appears unlikely to become a major source of systemic financial risk even if individual borrowers or funds suffer losses.
That doesn’t mean investors cannot lose money.
It means a private-credit downturn may look more like a painful asset-management problem than a banking-system collapse.
Higher Rates Create Another Test
The environment is still becoming tougher.
Borrowing costs across corporate America have risen sharply.
Lower-rated companies are now facing especially expensive refinancing conditions as Treasury yields climb.
Some of the weakest corporate borrowers face borrowing costs around 17%, according to recent Financial Times reporting.
That increases the likelihood that companies financed during the era of cheap money will struggle when they must refinance debt at today’s much higher rates.
Private-credit borrowers are not immune.
Many loans use floating interest rates.
That means a company can see its interest expense rise dramatically when benchmark rates climb.
Goldman previously estimated that roughly 15% of private-credit borrowers were not generating enough EBITDA to fully cover their interest expense, based on earlier industry data.
If rates stay high, the weakest borrowers will become increasingly difficult to refinance.
The Opportunity Hidden Inside the Stress
The irony is that the problems affecting private credit may also create some of its best investment opportunities.
When banks become cautious and weaker private lenders pull back, companies still need financing.
The remaining lenders can demand:
higher yields,
better collateral,
stronger covenants,
and more conservative leverage.
That improves the economics for investors willing to provide fresh capital.
Distressed debt and secondary markets can also become attractive when existing investors want liquidity badly enough to sell assets below intrinsic value.
That is why many alternative-asset managers view market stress not only as a threat but also as an opportunity.
The Alternative-Investment Boom Is Entering a New Stage
The first era of private markets was largely about expansion.
Money poured in.
Funds became larger.
Managers launched new products.
Private credit took business away from banks.
Now comes the harder stage:
proving that the model works during stress.
The winners are likely to be managers that can demonstrate strong underwriting, credible valuations and enough liquidity to survive waves of redemptions.
The losers may be funds that promised investors more liquidity than their assets could realistically provide.
Private credit’s problems in 2026 have therefore not destroyed the alternative-investment story.
They have changed it.
Investors are no longer asking simply:
“How much yield can I earn?”
They are increasingly asking:
“Who made the loan, what exactly do I own — and can I get my money back when I need it?”
Goldman’s survey suggests investors still believe alternatives deserve a place in their portfolios.
But after software fears, redemption gates and billions of dollars in withdrawal requests, that capital may no longer come as easily as it once did.
Private markets are still attracting enormous amounts of money.
The bigger question is whether the next wave of investors is buying into a durable source of diversification and income — or arriving just as years of easy private-credit growth finally face their first serious stress test.
