Structured and disciplined: How private credit counters volatility across market cycles

As private credit grows in scale and visibility, it has also become the subject of intense debate. Investors are reassessing how it fits within portfolios across different market conditions, particularly as volatility returns to global markets.

For global investment firm KKR, with its longstanding private credit platform, that means sticking to consistent underwriting and portfolio construction while adapting as market conditions evolve. In an uncertain environment, structure and discipline matter more than ever.

Daniel Pietrzak, global head of Private Credit at KKR, unpacks why private credit continues to draw attention, how different segments of the market are performing and what investors should be watching for as the cycle evolves.

Q: Why is everyone talking about private credit now?

Private credit, particularly direct lending, has become a large, mainstream market, so it is only natural that it is getting more attention.

Private credit platforms play an essential role as a source of capital, especially in areas where traditional channels are no longer as active. As banks have pulled back from certain types of lending, private credit has increasingly filled the gap by providing financing directly to companies.

From an investment perspective, direct lending has been a good place to be over the past several years, offering healthy returns for senior secured risk.

In our view, the relative resilience of private credit through recent volatility reflects its focus on senior secured lending, conservative structures and diversification, which together aim to cushion portfolios while delivering steady income rather than chasing cyclical upside.

Q: Should we be worried about recent defaults?

A lot of the recent discussion around private credit tends to conflate the broader market with direct lending. In reality, many of the most visible defaults have come from other corners of the market.

For those who take a closer look, direct lending is designed to be as steady as it gets. These are senior secured loans that are directly originated and negotiated with borrowers, with a clear emphasis on structure and downside protection. That looks very different from what people often picture when they hear terms like “systemic risk”.

As credit investors, our north star is simple: protect principal and collect coupons. Recent events have reinforced why that focus matters. When underwriting discipline weakens – whether through poor credit selection, insufficient diligence or relaxed covenants – the risk of credit deterioration increases.

At KKR, disciplined underwriting and portfolio construction are central to how we aim to manage risks and remain resilient through different phases of the cycle. That’s why we tend to focus our direct lending on the upper middle market – larger companies with stronger earnings and historically lower default rates.

Q: An even larger part of private credit today is asset-based finance. Where does that fit into all this?

Asset-based finance (ABF), which involves lending against pools of tangible or contractual assets, has become an increasingly important part of the private credit landscape. These assets can include consumer loans, mortgages, equipment leasing portfolios or renewable energy projects.

What stands out about ABF is that it gives investors access to a broader set of assets and cash flows driven by long-term, fundamental trends, often sourced and structured through scaled platforms with specialist expertise. These strategies also offer flexibility in structuring, deep collateral coverage and the ability to form direct or long-term partnerships with large counterparties.

Combining ABF with direct lending allows investors exposure to different sources of cashflow and risk drivers within a single allocation. We see private credit as a complementary, long-term allocation that seeks lower volatility and stable yield, rather than a tactical trade driven by short-term market timing.

Q: What are the top risks and opportunities you are watching for in 2026?

The economic backdrop remains full of crosscurrents. Tariffs, shifts in monetary policy and persistent inflation are all working their way through the system. Our focus is on being selective and making sure we are not sacrificing structure or downside protection simply to deploy capital.

At the same time, innovation is creating new financing needs. Artificial intelligence-driven capital expenditure and the expansion of data-centre infrastructure are opening fresh lanes for private credit, but they also require careful assessment of risk and structure.

These crosscurrents create opportunity as well as risk. Where market technicals have widened spreads, or where ABF can deliver predictable income with strong collateral, we continue to see attractive opportunities. Above all, complacency remains the biggest risk. Our job is to stay vigilant, challenge our assumptions and build portfolios that are designed to weather whatever comes next.

Explore how private credit can play a role in your portfolio.

Disclaimer: The information herein (including any “forward‐looking statements”) is subject to change, no assurance can be given that actual events or results will reflect any such information. KKR does not make any representation or warranty, express or implied, with respect to such information, and KKR has no obligation to update such information. Investors should keep in mind that the securities markets are volatile and unpredictable.

© 2026 Kohlberg Kravis Roberts & Co. L.P.