JPMorgan Chase has marked down the value of loan portfolios it holds against a number of private credit groups and is now tightening the terms on which it will lend to the sector, according to the Financial Times, corroborated by Reuters and CNBC.
The markdowns are concentrated in software loans, a segment that boomed during the low-rate era as private credit funds aggressively financed leveraged buyouts of technology companies. Deteriorating valuations in that cohort appear to have prompted JPMorgan to reassess the collateral underpinning its exposure.
The bank's decision to rein in lending compounds pressure on an industry that has expanded rapidly over the past decade. Private credit assets under management have grown to an estimated $1.7tn globally, with firms including Blackstone, KKR and Ares among the largest players. Shares in KKR and Blackstone rose on the news, according to Barron's, suggesting investors may view tighter bank financing as a competitive advantage for larger, better-capitalised managers.
The timing is notable. MarketWatch reports that a $33bn private credit fund is simultaneously facing heavy redemptions, though the identity of the fund was not confirmed in the source material available. Together, the two developments suggest liquidity and valuation stress is emerging across more than one corner of the market.
For portfolio managers, the key question is contagion. Banks providing subscription lines, NAV facilities and warehouse lending to private credit funds have long been seen as a transmission mechanism if valuations turn. JPMorgan's move signals that at least one major counterparty is acting on that risk.
