Private credit needs less noise, more underwriting

Private credit has no shortage of headlines, and Bryan High’s view is that many of them say more about the media cycle than the asset class itself.

Negative stories travel fast, especially in a market now large enough to attract scrutiny and strong enough to attract scepticism. But High’s argument is not that advisers should dismiss the concerns. It is that they should separate noise from nuance. In his telling, the health of private credit remains sound. That is provided investors understand that the real edge in the asset class still comes from old-fashioned underwriting discipline, portfolio construction and the willingness to walk away.

Not every headline signals a structural problem

High’s starting point is that recent controversies in private credit should not automatically be read as evidence of a broad systemic crack. Some of the most talked-about situations, he said, involved elements of fraud, and fraud is inherently difficult to underwrite in advance. “If somebody wants to do something criminal, it’s hard to be able to know that up front,” he said, while still acknowledging that these episodes warrant attention.

That nuance matters. It would be easy for advisers to look at a string of problematic names and conclude that private credit is running into a deeper structural reckoning. High’s counter is that a large and increasingly transparent sample of vehicles, particularly in North America, continues to show relatively healthy portfolios. In other words, some of the coverage is real, but some of it is also sensationalism. The challenge for allocators is to resist both complacency and overreaction.

This is where High’s broader philosophy comes into view. Do not evaluate private credit through the most dramatic anecdote. Judge it by the quality of underwriting, the diversity of the portfolio, and the consistency of income through the cycle. That is a less exciting lens, but probably the more useful one.

AI is changing risk, but not the job of a lender

Like almost every manager speaking to advisers now, High had to reckon with AI. His answer was refreshingly measured. AI has become a more material part of underwriting in the last six to twelve months, and Barings has brought in third-party consultants to reassess its exposure, particularly in software and services. But High’s conclusion was not that AI makes the sector uninvestable. It was the changes that a lender should be most alert to.

Businesses with embedded products, broad customer bases, and sticky data can still look resilient. By contrast, areas such as accounting and legal services may be more exposed to AI-driven disruption. That is, even if management teams initially present that as a productivity gain rather than a threat.

That distinction is important for advisers because it shows how private credit investors are now thinking about downside. Lenders are not underwriting for upside in the way equity investors do. Investors don’t ask whether AI makes a company more exciting. They ask whether AI threatens its cash flows and survival.

High’s framing was simple; the real risk is not modest disruption, but complete removal from the landscape. That is a very credit-oriented way of thinking.

“The name of the game in credit is not losing money.”

Selectivity is the whole point

The strongest theme in High’s thesis is selectivity. Barings is willing to miss deals. It is comfortable losing transactions where others are more aggressive. It avoids sectors where the consumer cycle can bite hard, and generally stays away from restaurants, retail, and commodity-linked exposures. That discipline is not a limitation. It is the point.

High’s philosophy is shaped by Barings’ heritage as part of an insurance group. That means thinking in decades, not quarters. It also means constructing portfolios around capital preservation and durable current income.

For life insurers, he noted, the core imperative is simple: do not lose money. That DNA has consequences. It means not needing to chase every spread. It means being comfortable if others win the racier mandates. It also means building portfolios that can survive idiosyncratic errors without jeopardising the whole book.

That logic extends to where Barings prefers to play. High made clear that the firm’s core focus remains the middle market. This is when compared with the larger end of private credit, where competition with liquid markets is tighter, and documentation can start to look more like broadly syndicated lending.

The middle market still offers a cleaner illiquidity premium and more lender protection. In a market that has grown rapidly, this was a reminder that not all private credit is the same.

Process matters more than prediction

High does not pretend to know when the next cycle will arrive. In fact, he jokes that credit investors have a habit of calling far more cycles than actually occur. But his answer to that uncertainty is not market timing. It is a process. Deep due diligence, early access to deals, sponsor information, third-party work, and internal cross-checking all play a part.

In many cases, Barings is effectively redoing much of the diligence undertaken by the private equity sponsor. All the while adding its own market work and industry perspective.

That process is strengthened by geography. Barings lends across North America, Europe, and developed Asia-Pacific, with teams on the ground and investment committees drawing on those perspectives. That creates diversification, but also a better read on relative value, legal nuance, and sector trends.

For advisers, this matters because it reinforces a basic truth about private credit. Manager selection is not just about brand or distribution. It is about whether the platform can genuinely source, assess and monitor risk across different parts of the market.

High’s final point was that private credit may actually be more attractive now because risk is being repriced more honestly. AI concerns and retail outflows in parts of North America have widened spreads and upfront fees, bringing more discipline back into the market. For a conservative lender, that is not bad news. It means being paid better for doing the same careful work.

For advisers, the takeaway is not that private credit is immune from disappointment. It is that the asset class still rewards patience, scepticism and restraint. In a market full of noise, High is making the old credit case. Lend carefully, avoid what you do not understand, and accept that missing some deals is often the price of protecting the portfolio.