A research report indicates that the US private credit and middle-market sector wrapped up the second quarter of 2026 with notably subdued buyout and direct-lending activity. This, according to PitchBook’s update which also noted that while the overall deal flow remained light, a handful of sizable financings provided highlights, alongside ongoing investor redemption pressures at several non-traded business development companies (BDCs) and fresh warnings about portfolio concentration risks.
One of the quarter’s standout transactions came as private club owner and operator Invited Clubs secured more than $1.7 billion in loans to back KSL Capital Partners’ acquisition of the business from Apollo. Ares Credit funds led the financing and acted as administrative agent.
The company already carried existing first-lien private credit debt held by Ares, KKR, HPS, Lord Abbett, and MSD Partners, priced between SOFR plus 475 and 500 basis points.
Redemption activity drew significant attention across non-traded BDCs.
Ares Strategic Income Fund received requests to repurchase 14.4% of shares outstanding in Q2 but honored only its 5% quarterly cap. Nearly two-thirds of those requests came from investors who had also tendered in the prior quarter, when redemptions reached 11.6%.
Requests were heavily concentrated among a small group of non-US institutions and family offices, which represent less than 1% of shareholders yet accounted for nearly half the Q2 volume.
Antares Strategic Credit Fund (A-STAR) faced requests totaling 10.33% of shares for the first half of the year and will repurchase 7.5%, its stated semi-annual limit.
In contrast, Goldman Sachs Private Credit Corp. saw lighter pressure at 3.24% of shares, while Nuveen Churchill Private Capital Income Fund reported approximately 2.3% tendered—both below their 5% caps.
Ieva Banyte, director of debt capital markets at IQ-EQ, noted a more challenging environment for BDCs as interest rates decline.
Net investment income faces pressure, prompting greater caution on dividend policies.
She anticipates increased defaults in the software sector over the coming years as 2022-vintage loans near maturity and require refinancing. Banyte also highlighted that many private credit managers’ infrastructure was not originally designed for consistent, detailed portfolio disclosures, suggesting greater transparency may emerge.
New partnerships are forming to address underserved segments.
Phoenix Merchant Partners and Texas Capital Alternative Asset Management announced a strategic relationship to launch Spurstone Credit, a perpetual non-traded fund focused on senior secured direct lending to core middle-market companies with $100 million to $1 billion in revenue.
Elsewhere, BridgeBio Pharma raised $1 billion in preferred equity financing led by Sixth Street ($800 million), with HealthCare Royalty (a KKR business) contributing $133.9 million.
The instrument carries a 7% initial dividend (payable in kind or cash) and features a conversion price starting above a 100% premium to the recent volume-weighted average share price.
Other notable activity included a $400 million credit facility for Aquila Air Capital (structured by ATLAS SP Partners), $350 million in senior secured notes for Zymeworks placed with OMERS, and a $338 million refinancing for Battalion Oil that lowered pricing to SOFR plus 650 basis points plus a credit spread adjustment while extending maturity to December 2029.Market data showed continued moderation in pricing.
The 90-day rolling average spread for large corporate loans stood at 282 basis points as of July 2, with yields around 6.80%. Average new-issue first-lien statistics over the prior 30 days reflected an average spread of 289 basis points across 82 deals.
A separate market feature from Clearwater Analytics has now flagged subtle concentration risk in life insurance portfolios.
The firm estimates that 10-20% of insurers holding limited-partner exposures to private credit funds are also exposed to the underlying funds’ debt.
Life insurers have grown allocations to private credit significantly, with the median portfolio allocation reaching 9% of total assets (up 110% since 2021). The PitchBook update has now concluded that the quarter underscored a market in transition—marked by selective large financings, redemption management, and evolving risk considerations—while direct lending volumes and buyout activity remained restrained.