Key Takeaways
- • Marathon Asset Management Chair and CEO Bruce Richards expects an "unprecedented fallout" from private credit's exposure to the software sector.
- • Richards says Marathon's own private credit business has about 1% exposure to software, far below the level he sees across the industry.
- • Richards forecasts a 15% default rate on highly leveraged software loans by 2028, when billions in debt come due, with direct lending the most affected segment.
- • Richards argues that hard-asset, low-obsolescence lending offers private credit investors a different route.
Summary
Marathon Asset Management Chair and CEO Bruce Richards expects an "unprecedented fallout" from private credit's heavy exposure to software companies, according to Pensions & Investments. The published coverage of his remarks describes software as the area with the most significant problems within direct lending. Bloomberg reported that Richards is forecasting a 15% default rate on highly leveraged software loans by 2028, when billions of dollars in debt come due.
Richards has argued that private credit is too exposed to the software industry. He cited a figure of 23% of direct lending portfolios being in software, compared with only 1% of private US companies, according to one of the related reports. He also said Marathon's own private credit business has roughly 1% exposure to software. Coverage of his remarks also addresses how other managers missed these signals and grew large in the sector.
Richards's view is that lending against hard assets with low obsolescence risk is a more resilient approach than software-heavy direct lending. The primary article's main text is limited, so the full context of his analysis, including detailed portfolio data and the specific default assumptions, is not available in the source material reviewed here.
Richards has argued that private credit is too exposed to the software industry. He cited a figure of 23% of direct lending portfolios being in software, compared with only 1% of private US companies, according to one of the related reports. He also said Marathon's own private credit business has roughly 1% exposure to software. Coverage of his remarks also addresses how other managers missed these signals and grew large in the sector.
Richards's view is that lending against hard assets with low obsolescence risk is a more resilient approach than software-heavy direct lending. The primary article's main text is limited, so the full context of his analysis, including detailed portfolio data and the specific default assumptions, is not available in the source material reviewed here.
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