Private credit funds mark investment values lower, filings show

• CION Investment Corp saw its fair value-to-cost ratio fall 176 basis points to 91.59%, while Ares Capital dropped 131 basis points to 99.50% and several BDCs reported NAV declines ranging from 2.70% to 4.95%
• Moody's downgraded its outlook for the BDC sector to negative, and Fitch reported redemptions at perpetually non-traded BDCs climbed to 3.8% of prior-quarter NAV in Q1
• MSCI reported that private-credit funds have marked down more than 10% of their loans by at least half, with loans valued below 50% typically indicating deep distress or restructuring risk

Private Credit Funds Mark Down Investments in Q1 2026

Summary

Major private credit funds significantly reduced investment valuations in the first quarter of 2026, with AI disruption and borrower stress weighing on the $3.5 trillion market. A Reuters analysis of 14 business development companies (BDCs) revealed their aggregate fair value-to-cost ratio declined 103 basis points to 98.55% by end-March, marking investments approximately $1.2 billion below amortized cost.

Key Valuation Declines:

• CION Investment Corp: ratio fell 176 bps to 91.59%
• Ares Capital Corp: dropped 131 bps to 99.50%
• Blackstone Secured Lending Fund: declined 122 bps to 97.52%
• Goldman Sachs BDC: fell 119 bps to 94.88%

Net Asset Value (NAV) Deterioration:

• BlackRock TCP Capital: NAV dropped 4.95% to $6.72
• CION: fell 4.72% to $13.11
• Sixth Street Specialty Lending: declined 4.36% to $16.24
• Goldman Sachs BDC: down 3.72% to $12.17
• Blue Owl Capital: fell 2.70% to $14.41

BDC managers attributed much of the decline to market-wide spread widening rather than borrower-specific issues. However, the markdowns coincide with intensifying scrutiny of the private credit sector, which expanded rapidly in recent years.

Market Indicators:

• Moody's downgraded the BDC sector outlook to negative
• Fitch reported redemptions at perpetually non-traded BDCs reached 3.8% of prior-quarter NAV in Q1
• MSCI found over 10% of private credit loans marked down by at least half, indicating deep distress or restructuring risk

The situation was exemplified by FS KKR Capital Corp, where KKR restructured its advisory package following mounting losses and elevated non-accruals.