#United States #San Francisco #private credit #Heron Finance #Benchmark Report

Heron Finance Releases Comprehensive Report on Private Credit Trends

Heron Finance has recently unveiled its State of Private Credit Benchmark Report (Q1 2026 edition), which offers a thorough examination of risk and performance trends across 71 of the most significant private credit funds globally. This insightful report aggregates quarterly data from various fund managers and SEC filings, representing more than $1 trillion in total private credit assets under management.

The report presents essential metrics evaluated over a two-year timeframe, shedding light on evolving facets of borrower health, fund leverage, and return dynamics in the private credit market. According to Khang Nguyen, Chief Credit Officer at Heron Finance, the report focuses on critical risk and performance metrics. Despite emerging pressures, there is no indication of systemic stress in the market. Notably, non-traded Business Development Companies (BDCs) exhibited superior performance compared to publicly listed counterparts, particularly regarding credit quality indicators, such as payment-in-kind (PIK) interest and non-accruals.

Key Findings from the Report

The Q1 2026 Benchmark Report highlights several critical findings:

• - PIK Interest Trends: Payment-in-kind interest rates have mostly stayed within historical parameters. Despite a slight decline in Q3 2025 compared to earlier quarters, rates remain in a range consistent with long-term averages, which reassures investors regarding potential widespread strain in the market.
• - Non-Accrual Rates: The percentage of non-accruing loans has seen a minor uptick, rising to 0.9% in Q3 2025. However, this remains relatively low, with higher concentrations occurring in lower middle-market segments. Publicly listed BDCs recorded a significantly higher 2.7% in non-accruals, contrasting sharply with a mere 0.3% seen in non-traded BDCs.
• - Borrower Fundamentals: There has been a slight improvement in borrower leverage ratios and interest coverage, bolstered by decreasing interest rates following numerous rate cuts throughout 2025. This trend reflects a resilient underlying borrower base despite market fluctuations.
• - Loan Quality Consistency: Credit quality has remained stable, with portfolio-level loan-to-value (LTV) ratios lingering at a conservative 40%. Approximately 90% of loans made are classified as first-lien, historically showing recovery rates above 50% under default situations.
• - Returns Normalization: Effective loan yields have tapered from recent cyclical highs, aligning within a more sustainable range, which is healthy for long-term market stability. Quarterly returns have moderated, suggesting a narrowing dispersion across different segments.
• - Manager-Level Dispersion: Emerging signs of performance divergence among fund managers have unfolded, particularly regarding publicly listed BDCs. A modest rise in loans performing below expectations emphasizes the critical nature of effective manager selection and portfolio diversification as 2026 approaches.

Core Private Credit Metrics Evaluated

The report benchmarks 11 core private credit metrics that significantly impact performance assessments:

• - PIK Interest
• - Non-Accruals
• - Credit Loss (Net)
• - First Lien Loan FMV / Cost
• - Borrower Debt / EBITDA
• - Borrower Interest Coverage
• - Average LTV
• - Debt / Equity
• - Underperformance
• - Effective Loan Yield
• - Annualized Quarterly Total Returns

Each of these metrics is complemented by historical trend charts, enhancing the report's contextual relevance and allowing investors to make informed comparisons across market segments.

For further insights and detailed analysis, readers can access the full State of Private Credit Benchmark Report (Q1 2026 edition) on the official Heron Finance website.

About Heron Finance

Heron Finance specializes in offering tailored private market investment portfolios for individual investors and family offices, focusing on a broad array of funds and encompassing over 10,000 underlying private credit, equity, and infrastructure investments.

The firm aims to facilitate an entirely digital investment experience, allowing users to enter private markets with minimal investment thresholds, monthly subscriptions, and simplified taxation processes.

Discover more about investing in private markets through Heron Finance by visiting its website.