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Weekly Market Summary
May 4 to May 8, 2026
Extra Credit*
- Private credit has remained in focus in recent years, though sentiment has turned more negative as redemption requests have increased. Lenders argue that this shift in tone is not reflective of underlying fundamentals and maintain that portfolio quality remains solid, pointing to enhanced disclosures and greater transparency around holdings. Even so, critics continue to highlight the opacity of the asset class and the lack of a single, comprehensive measure of rising credit risk. To assess these concerns, LCD analyzed portfolios across more than 170 Business Development Companies (BDCs) over a three year period. The results suggest some emerging pressure, with nearly 10% of the roughly 4,700 portfolio companies showing signs of stress by year end 2025.1
- Volume of first-lien Term Loan (TL) and unitranche investments under pressure totaled $24.5 billion at the end of 2025, a 21% increase from 2024. Most stressed borrowers are still paying cash. Out of the 467 companies on the watchlist at the end of 2025, 215 did not use payments-in-kind (PIK) as of Q4 2025.1
- A rebound in the loan market in April, along with steady inflows into loan funds and reduced expectations for Fed rate cuts, could help stabilize what has been a prolonged decline in assets under management. In March, AUM across leveraged loan ETFs, mutual funds, and closed end funds fell by $3.9 billion to $93.3 billion, marking the eighth consecutive monthly decline. Over that period, total AUM has dropped by $17.7 billion, according to Morningstar.2
1Pitchbook as of 12/31/25 and 2Morningstar as of 4/30/26.
Previous reports
*Source: Morningstar®, Bloomberg, Credit Suisse. OAS is Options Adjusted Spread. 4-year discount margin is used for spread for bank loans. Yield quoted is yield-to-worst or equivalent calculation. YTD Low / High for yields are based on end of week and not intraday movements. Indexes and sub-indexes: Investment-grade corporates represented by Bloomberg US Corporate Bond Index. High-yield bonds represented by Bloomberg US Corporate High Yield Index. Bank loans represented by Morningstar LSTA US leveraged Loan Index. The red and green arrows depicted under Yields, Option Adjusted Spreads, and Prices indicate a higher or lower value from the previous week.
Past performance does not guarantee future results. Index performance is not indicative of fund performance. Indexes are unmanaged and it is not possible to invest directly in an index.
Any discussion of individual companies is not intended as recommendation to buy, hold or sell securities issued by those companies. Aristotle Fund holdings can be found on the fund pages linked above.
Investors should consider a fund’s investment goal, risks, charges, and expenses carefully before investing. The prospectus and/or the applicable summary prospectus contain this and other information about the Fund and are available from AristotleFunds.com. The prospectus and/or summary prospectus should be read carefully before investing.
Investing involves risk. Principal loss is possible.
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