The headlines are loud. The portfolio is built quiet.
Why private credit concerns aren't your portfolio's concerns.
There’s a lot of noise right now about private credit. If you’ve opened the Financial Post or the Globe this week, you’ve probably seen some version of the same story: stress in the asset class, concerns about defaults, questions about whether the tide is going out.
I want to address it directly.
What the headlines are actually about
The current concerns are focused on a specific slice of the private credit market — direct lending to highly leveraged mid-market companies, much of it issued during a period of exceptionally loose underwriting. That’s a real conversation worth having. It’s just not the conversation that applies to what your portfolio actually holds.
What you actually own
The private credit exposure in the Watermark program is institutional-grade, first-lien secured, and sourced through managers whose underwriting standards haven’t meaningfully moved through two decades of market cycles. The positions are diversified across hundreds of underlying loans. The average loan-to-value sits well below the watermarks that make headline news.
This is the difference between “private credit” as an asset class and “private credit” as a specific implementation. The category name is the same. The risk profile is not.
The harder truth
Every asset class gets its cycle. Private credit is getting one right now. In five years it’ll be something else — equities, real estate, something we haven’t thought about. The job of a portfolio isn’t to avoid every cycle. It’s to be built so that no single cycle can take the whole thing down.
That’s why your portfolio isn’t just private credit. It’s public equities, sovereign bonds, private equity, real assets, and yes — private credit. Each one has its quiet years and its loud ones. The architecture is what keeps the overall picture stable while the individual pieces move.
If you’d like to talk through your specific holdings, reach out. Otherwise, this is one of those moments where the best thing to do is — nothing.