What's Going on Under the Hood in Private Credit?
April 22, 2026 | Read online John Markell & Matt Schwartz: What's Going on Under the Hood in Private Credit? The $600 billion software credit problem and the market forming to solve it.
Inside The Episode
The headlines say private credit is in trouble. Here's what the practitioners are saying.
The pressure is real. The cause is complicated. Redemptions are up - but the story isn't as simple as loans failing. The real story right now is relative portfolio exposure.
Investors are seeing "software exposure" in their portfolios and many justifiably want to reduce it, given AI uncertainty around business models. Whether the underlying loans justify that fear is still an open question.
What isn't debatable: the redemption pressure is real, and the market infrastructure to absorb it doesn't exist yet.
John Markell of Armentum Partners and Matt Schwartz, Head of U.S. Finance at DLA Piper, live inside this market every day. In this episode of the Modern Capital Podcast, John, Matt, and Marc cover:
- Why software credit has been the best-performing segment of private credit over the past five years and why that track record isn't cutting through the current noise
- The PE-backed vs. minority-owned distinction the market is missing: 2x ARR leverage versus 0.5x is a fundamentally different credit risk - the market is pricing them identically
- Why back-leverage providers tightening advance rates is adding pressure one step further removed from the actual loans
- Why software loans can't be sold the way conforming loans can and what lenders under liquidity pressure are discovering too late
- Fear compresses entry prices: who the sophisticated buyers are, why they're watching closely right now and why secondaries are their entry point
- Why the secondary market infrastructure to connect buyers and sellers is forming fast
"Right now, software's being shoved in with other conforming loans, and people are going, wait, I see it there, I don't want it. So there has to be another way to do it."
The buyers and sellers exist. The secondary market infrastructure to connect them is still forming. But it's forming fast - and this conversation is happening right in the middle of it.