BDC Belden Inc. : Bullish and Bearish Analyst Opinions

Short private credit ETFs/funds as the CEO of a major bank expresses a forward-looking, bearish view on the asset class, implying deteriorating credit quality and larger-than-anticipated write-downs.

Wang notes that BDCs (publicly traded private credit funds) are taking "huge huge haircuts" because they are big lenders to software technology companies. As AI disrupts legacy software models (SaaS), the companies that borrowed money from private credit funds are failing. This credit stress is "creeping into the debt markets" and has not fully played out. SHORT. Fed rate cuts could bail out floating-rate borrowers by lowering interest expenses.

UK lender MFS collapsed amid fraud allegations; TPG has £44M ($59M) exposure. Jamie Dimon warns that private credit portfolios have ~23% exposure to software companies, compared to <10% in public indices. The MFS collapse is a "canary in the coal mine." If software valuations compress or churn increases (as seen in Block/Duolingo), the collateral backing these private credit loans deteriorates. TPG is explicitly named as having exposure to the MFS fallout. AVOID. The "fat tail" risk in private credit is widening, specifically in portfolios heavy on software debt. The MFS issue remains idiosyncratic and contained to the UK bridging market.

UBS warns "private credit default rates could surge 15%." The speaker notes "new limits for retail investors" regarding "Blue" (likely Blue Owl) and mentions critical views from Citron Research. Private Credit and BDCs (Business Development Companies) have thrived in a low-default, low-rate volatility environment. If defaults hit 15% and retail liquidity is gated (limits on withdrawals), valuations will compress, and fee income for the major asset managers (Blue Owl, Blackstone, Ares) will be challenged. SHORT / AVOID exposure to private credit managers and BDCs until default rates stabilize. Private credit structures (bilateral negotiation) may allow managers to "extend and pretend," masking true default rates and keeping NAVs artificially stable.

80-90% of the private credit/leveraged loan exposure in tech is specifically in "software" and "business services." AI is actively disrupting these legacy software/service models. Unlike hyperscalers spending money (good for equity), these private companies rely on stable cash flows that AI automation threatens to erode. Mish warns of credit quality deterioration here. AVOID Private Credit/BDCs with heavy exposure to legacy software/services. The "AI disruption" timeline is slower than expected, allowing these companies to refinance or pivot.