PE Risks Outweigh Private Credit, Verdad Chart Shows
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- Verdad analysts Greg Obershain and Daniel Rasmussen argued private equity risks dwarf private credit risks, citing 20 years of public-market data showing matched equities always posted worse returns than high-yield bonds at every notch of credit downgrade.
- Verdad used a mortgage analogy to frame the point: if a bank marks a property's mortgage from 100 cents to 80 cents on the dollar, the home equity is 'close to wiped out' since equity is junior to debt in the capital stack.
- Verdad conceded private equity could still outperform if a few big winners offset losses, projecting a scenario where 40% of a fund's deals go to zero but the remaining 60% return 2x, keeping the fund profitable — a dynamic not available to private credit lenders.
- Blue Owl Capital (OWL) stock has tumbled 40% year-to-date in 2026, and Ares Management (ARES) shares have dropped 30%, as business development companies investing in private capital have struggled.
- The S&P listed private-equity index has lost 11% in 2026, reflecting broad weakness across publicly traded PE firms.
Why it matters: With Blue Owl down 40%, Ares down 30%, and the listed PE index off 11% in 2026, publicly traded proxies are already absorbing heavy losses — but Verdad's capital-stack analysis implies equity holders in private portfolios could face even steeper writedowns than the BDC lenders making headlines, since they absorb losses after debt is impaired.
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