SAN FRANCISCO, Jan. 28, 2026 /PRNewswire/ — Heron Finance today announced the release of its State of Private Credit Benchmark Report (Q1 2026 edition), a comprehensive analysis of risk and performance trends across 71 of the world’s most established private credit funds.

To read the State of Private Credit Benchmark Report (Q1 2026 edition), visit heronfinance.com/blog/the-state-of-private-credit-benchmark-report-q1-2026

The report is based on quarterly, fund-level data, as of Q3 2025, derived from SEC filings and reporting by fund managers that represent more than $1 trillion in aggregate private credit assets under management. Metrics are presented over a two-year historical period to highlight evolving trends in borrower health, fund leverage, and return dynamics across the private credit market.

“This report focuses on key risk and performance metrics on a quarterly basis,” said Khang Nguyen, Heron Finance’s Chief Credit Officer. “While certain pressures are emerging at the margin, there are no signs of systemic stress. In particular, non-traded BDCs outperformed publicly listed BDCs across credit quality measures such as PIK interest and non-accruals.”

Key findings from the State of Private Credit Benchmark Report (Q1 2026 edition) include:

PIK interest remained within historical norms. Payment-in-kind (PIK) interest declined modestly in Q3 2025 compared to earlier quarters in the year and remained broadly in line with long-term averages, suggesting no widespread stress.
Non-accruals ticked higher but remained low. Non-accruals rose to 0.9% in Q3 2025, with higher levels concentrated in lower middle-market portfolios. Additionally, publicly listed BDCs reported non-accruals of 2.7% in Q3 2025, compared with 0.3% for non-traded BDCs, highlighting a meaningful divergence in credit quality. On an absolute basis, non-accruals remained below long-term historical levels at the industry level, particularly when viewed against realized loss rates of approximately 1% annually over the past two decades.
Borrower fundamentals showed modest improvement. Average borrower leverage ratios and interest coverage continued to improve slightly, supported in part by declining interest rates following multiple rate cuts during 2025.
Loan quality remained stable. Portfolio-level loan-to-value (LTV) ratios remained conservative at approximately 40%, and roughly 90% of loans are first-lien, which historically have exhibited recovery rates well above 50% in default scenarios.
Returns normalized from recent peaks. Effective loan yields declined from cycle highs but remained elevated relative to pre-hiking periods. Annualized quarterly total returns have moderated into a more sustainable range, with dispersion across segments narrowing over time.
Early signs of manager-level dispersion emerged. The share of loans performing below manager expectations increased modestly and remained concentrated among a limited number of funds, especially the publicly listed BDCs, highlighting the growing importance of manager selection and portfolio diversification heading into 2026.

The report benchmarks 11 core private credit metrics, including:

PIK interest
Non-accruals
Credit loss (net)
First lien loan FMV / cost
Borrower debt / EBITDA
Borrower interest coverage
Average LTV
Debt / equity
Underperformance
Effective loan yield
Annualized quarterly total returns

Each metric is accompanied by historical trend charts to provide additional context and comparability across market segments.

To read the State of Private Credit Benchmark Report (Q1 2026 edition), visit heronfinance.com/blog/the-state-of-private-credit-benchmark-report-q1-2026

About Heron Finance

Heron Finance provides individual investors and family offices with diversified private market investment portfolios, offering exposure to 20+ funds and more than 10,000 underlying private credit, private equity, and private infrastructure investments.

Through a fully digital investing experience, Heron Finance enables access to private markets with low minimums, monthly subscriptions, no capital calls, no multi-year lockups, and a single consolidated tax form.

Individual investors can invest with Heron Finance in three steps: receive a personalized portfolio recommendation, fund an investment through a standard or IRA account, and monitor returns and portfolio composition on an ongoing basis.

Learn how to invest in private markets at heronfinance.com.

Media Contact:
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State of Private Credit Benchmark Report data sources:
All metrics are calculated as of Q3 2025 as the median quarterly fund data, based on SEC filings and fund reporting from 71 private credit funds managed by firms with greater than $1 trillion in aggregate private credit AUM. Lower MM refers to lower middle market companies, which report annual EBITDA of less than $25 million; core MM refers to core middle market companies, which report annual EBITDA greater than $25 million but less than $75 million; and upper MM refers to upper middle market companies, which report annual EBITDA greater than $75 million.

Disclosure:
Any financial forecasts or returns are for illustrative purposes only and are not guarantees of future results. Private credit investments involve risks, including credit, liquidity, and interest-rate risk. Investors may lose principal and accrued interest in the event of borrower default.

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