Resources/Weekly Insights

Volume 15, Edition 6 | February 16 - February 22, 2026

A Private Credit Gut Check

Doug Walters, CFA

Private credit and illiquid investments have grown rapidly over the past decade, promising diversification and higher returns. Recent headlines are a reminder that what looks attractive in calm markets can feel very different when flexibility matters most.

Contributed by Doug Walters, David Lemire, Max Berkovich, Matthew Johnson

Recent headlines around Blue Owl and private credit have brought renewed attention to an asset class that has been aggressively marketed to individual investors over the past several years. While the details differ from firm to firm, the pattern is familiar: rapid growth built on illiquid strategies, followed by tougher questions when market conditions tighten.

For us, this moment echoes conversations we’ve been having for years.

Diversification myth

We regularly meet with well‑spoken salespeople who walk through our door genuinely surprised that we aren’t interested in their “diversifying” private investments. I ask them all a simple question: How do your diversifying investments help if we can’t rebalance with them?

There’s no satisfying answer.

But enough of those moments can make you doubt your convictions. When smart, confident people tell you that you’re missing something, it’s natural to wonder whether you are. Then we get a stretch of headlines like the one from last week, and we are reminded that these questions matter.

Risk tradeoffs

Private investments often promise higher returns, diversification, and access to opportunities unavailable in public markets. In practice, those benefits tend to be far less reliable than the marketing suggests, especially for individual investors. The risks don’t usually show up when markets are calm. They show up when flexibility matters most.

Liquidity is the most obvious trade‑off. Lockups, redemption gates, and queues are easy to ignore during good times. They are much harder to ignore when portfolios need adjustment, cash needs arise, or conditions change. An investment that cannot be adjusted is not just illiquid… it’s unmanageable.

Transparency presents a similar challenge. Infrequent, model‑based valuations can smooth the ride on paper, but they don’t reduce underlying risk. They simply delay its recognition. When liquidity is tested, that perceived stability can disappear quickly.

And then there is cost. Layers of fees raise the hurdle for success, often leaving investors with outcomes that fail to justify the added complexity and sacrifice.

Common sense

Our caution does not come out of fear or stubbornness. It comes from common sense. The private credit industry grew out of the ashes of the Great Financial Crisis, as regulators attempted to build in greater consumer protections in the public debt markets. Enter private credit… a mechanism for skirting those rules… less‑regulated, less‑liquid, and often lower‑quality borrowers. This is not an obvious recipe for better investor outcomes.

As an engineer, I love technology and innovation. Yet moments like this remind us that smart investing isn’t always correlated with increasing sophistication. Sometimes it’s about having the conviction to stick with what is sensible, transparent, and evidence-based… especially when doing so feels unfashionable.

3.0%

Core PCE Inflation came in higher than expected

The Fed’s preferred inflation measure came in at 3%, the highest reading since April 2024. The Fed would prefer to see that number closer to 2%.

Headline of the Week

GDP Meets a New Kind of Uncertainty

This week’s fourth‑quarter GDP report offered a reminder that headline numbers sometimes obscure more than they reveal. Growth slowed sharply to a 1.4% annualized pace, a clear comedown from the prior quarter’s strength. Yet the print landed in the long shadow of last fall’s extended federal shutdown, whose mechanical drag now shows up in the data. In that sense, the report feels less like a turning point and more like another chapter in a familiar story: a steady economy complicated by one‑off distortions and incomplete signals.

Still, the underlying message is not entirely noise. Consumer spending softened, adding to the emerging pattern of resilience at the top and more strain lower down the income ladder. And while AI‑linked investment was widely credited with propping up growth earlier in 2025, the latest figures offer a quieter backdrop—neither confirming a slowdown nor dispelling doubts about its durability.

Layered on top of the GDP release was the Supreme Court’s decision striking down the administration’s broad‑based tariffs. The ruling may ease some price pressure, but it also opens another period of policy recalibration. Together, the day’s events reinforce a theme running through recent months: uncertainty, not clarity, continues to shape the economic narrative.

The Week Ahead

Another light week is in store. The State of the Union address and Nvidia’s earnings are expected to get all the attention.

Capital theater!

The President will address a joint session of congress on Tuesday night.

The address is expected to outline the administration’s legislative priorities for 2026, with a focus on the economy, national security, and initiatives related to the nation’s semiquincentennial.
The Supreme Court ruling on Friday on tariffs will get some time along with a review of the administration’s year one highlights.
Virginia Governor Abigail Spanberger will deliver the Democratic response.
Whether any market moving developments occur is anyone’s guess at this point.

Chipping In

Earnings season starts to tail off now, but not before the biggest company takes a turn.

Nvidia, with a market capitalization of $4.5 trillion, is expected to report year-over-year earnings growth for the quarter of over 71%, while the stock is up 35% in that period.
The microchip manufacturer’s results will matter less than the guidance it will serve up.
Stock analysts expect the figure for the upcoming quarter to be a 74% increase in earnings.
The options market implies a 6% move for the stock in either direction after the results.
Other AI beneficiaries reporting next week include Dell Technologies and CoreWeave.
Retailer’s Home Depot, Lowe’s, and TJX Companies will join Berkshire Hathway and Salesforce as other companies to keep an eye on in an otherwise slow week.

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