Overcoming the Cockroaches: Communicating in Private Credit Today

Overcoming the Cockroaches: Communicating in Private Credit Today

November 2025

The private credit industry has been receiving a lot of negative attention recently, but talks of bubbles and contagion could also be a symptom of poor communications

By Kainoa Blaisdell, Asia Pacific Financial Practice Lead, Sandpiper

When JPMorgan’s Jamie Dimon warned last month that “when you see one cockroach, there are probably more,” in reference to emerging risks in the private credit market and high-profile defaults at First Brands and Tricolor Holdings, headlines of systemic infestation in the asset class quickly followed around the world.

Among the many pieces of coverage over the last few weeks, a piece in The Financial Times took things a step further, calling out a misplaced prevailing sense of calm and complacency despite the apparent risks present in rising exposure to private lending, questionable lending standards and a fragile global economy – “canaries in the coal mine” for private credit investors.

While calls for smarter oversight of private lending practices and market interlinkages are warranted, these generalisations could risk oversimplifying reality and expose a deeper failure in how the industry communicates with the market.

Private credit, now a more than US$3 trillion asset class, has become an easy target for alarmism. Its rise to current prominence was born from tighter post-GFC bank regulations and investors’ search for yield in the low-rate environment. That said, its history and evolution have spanned a much longer period of both good and bad times.

In good times, looser underwriting and generous deal terms have crept in; in bad times, some of those loans have failed. That cycle is as old as credit itself. The current narrative, however, has tended to conflate the inevitable with the existential.

Risk is Not a Flaw – It’s Part of the Product

The truth is that the comparatively attractive yields in sub-investment-grade credit exist precisely because of its inherent risks, and defaults do happen. However, this is often not adequately addressed or overlooked in external communications with stakeholders.

Historical data over the last 25 years show that 3.4% of high-yield bonds default each year, and more in downturns. For an industry now making thousands of loans annually, a few dozen notable failures should not be surprising – it’s statistics, not all scandal. Fund manager skill in identifying opportunities, managing risk and realising positive performance through market cycles has always been important in private market asset classes – something that is usually only remembered during periods of uncertainty.

As Howard Marks of Oaktree Capital recently observed in his memo “Cockroaches in the Coal Mine,” the current spate of credit failures should not be mistaken for a systemic issue. The financial system’s “plumbing,” as he puts it, remains intact. What we are seeing instead is a behavioural phenomenon – imprudent loans and overconfidence clustering in good times as lenders and investors relax their discipline. These episodes are not signs of structural weakness but of human nature at work: “it isn’t systemic, but it is systematic.”

While the financial plumbing remains relatively sound, the narrative around private credit is less so. With private credit now firmly in the spotlight, scrutiny is rising in ways many fund managers have not had to navigate before. The comfort of favourable tailwinds for the asset class over the last couple of decades has given way to a decidedly more complex communications environment.

This moment calls for firms to step up their communications efforts to better educate stakeholders, enhance transparency around capital deployment decisions and risk management, and rebuild confidence in how the asset class operates.

The Current Communications Problem

Where the private credit industry faces its real test is not just in portfolio performance, but in perception management. The sector has grown faster than public understanding of how it works and is evolving.

As portfolio managers brace for these tests amid geopolitical and economic uncertainty, the differentiator will be how they communicate through it – particularly with portfolio companies, investors, and regulators. Against that backdrop, industry stress, however routine, can be misinterpreted as signs of fragility. This creates a need for general partners to contextualise risk before others define it for them.

The industry has arguably faced a similarly defining moment before. During the Covid-19 pandemic, when many questioned the long-term resilience of private credit, I spoke with a managing partner at a large U.S.-headquartered, sponsor-backed lending firm who shared an important view that stuck with me. In times of stress, he said, the best lenders don’t retreat – they become more collaborative and intentional. “You have to roll up your sleeves and engage with your borrowers and investors when conditions are toughest. That’s what sets us apart.”

That mindset feels even more relevant today. Effective communication is a strategic competency, essential for maintaining trust, stability, and alignment across stakeholders through the inevitable ups and downs. When managers communicate with clarity and openness, they are taking a step to reinforce the fact that private credit is, at its core, a relationship business built on long-term partnerships.

Four Considerations for Private Credit Communications

1. Own your unique narrative
Private credit firms need to define who they are, what they do, and why they are different. In a competitive market where headlines continually shape perception, the strongest managers lead with clarity, consistency and purpose rather than reacting to noise.

2. Communicate process, not perfection
Investors expect transparency around underwriting discipline, covenant enforcement, and recovery processes. Explaining ‘how’ managers respond to portfolio stress and defaults builds confidence in ‘why’ they invest with them. Sugarcoating the risks sets firms up for tougher conversations later.

3. Lean into continued education
There is a tendency for firms to take their own understanding of what they do for granted. This is usually not intentional; rather, it’s a symptom of being so deeply embedded in the detail. Firms that invest in continuing to educate stakeholders can build lasting confidence and reduce misperception when times get tough. Plain language communications help turn perceived complexity into credibility.

4. Prepare before you are tested
Closer scrutiny is inevitable in a rapidly maturing asset class. The best firms have prepared for this, building clear protocols for internal communication, investor engagement and media responses before problems emerge. Investing in a multi-stakeholder plan ensures consistency when things go sideways and is an opportunity to demonstrate industry leadership when the market is under pressure.

This Mature Industry Needs Mature Communications

The private credit market no longer sits in the shadows, it is part of the financial mainstream and integral to capital formation. With that comes the responsibility to communicate with the same rigour and sophistication as public markets.

As we noted in an earlier Sandpiper perspective on private markets, “Rethinking Investor Communications in an Age of Democratisation,” the bar for industry communicators is rising. The same principles apply here.

Recent commentary should remind all of us that there will always be “cockroaches” somewhere in the system. The opportunity, however, lies in using moments like this to consider how a firm can engage more collaboratively and intentionally with stakeholders. Doing so is a source of “reputational alpha” that supports business objectives across the capital lifecycle as tides rise and recede.

Related news & insights: