SAN FRANCISCO, June 18, 2026 /PRNewswire/ — Heron Finance released its State of Private Credit Benchmark Report (Q2 2026 updated edition). The State of Private Credit Benchmark Report provides industry professionals, media, and investors with a comprehensive analysis of risk and performance trends across 69 of the largest private credit funds.
To read the State of Private Credit Benchmark Report (Q2 2026 updated edition), visit https://heronfinance.com/blog/the-state-of-private-credit-benchmark-report-q2-2026-updated-edition/
The report is based on quarterly, fund-level data, as of Q1 2026, derived from SEC filings and reporting by fund managers that represent more than $1 trillion in aggregate private credit assets under management. Metrics are presented over a two-year historical period to highlight evolving trends in borrower health, fund leverage, and return dynamics across the private credit market.
“This report tracks key risk and performance metrics across the U.S. private credit industry on a quarterly basis,” said Khang Nguyen, Heron Finance’s Chief Credit Officer. “The industry as a whole continues to demonstrate underwriting discipline, particularly on measures like loan-to-value and leverage ratios.”
Nguyen also highlighted softness in Q1 2026 returns, especially in the upper segment of the market. “The Q1 dip in upper middle market returns wasn’t just a fundamental credit story. We saw significant mark-to-market swings as valuations repriced around AI disruption and geopolitical tensions. However, the asset class is already showing early signs of a rebound, evidenced by the strong April returns reported by many of these larger credit funds.”
Key findings from the State of Private Credit Benchmark Report (Q2 2026 updated edition) include:
- PIK interest remains healthy: Payment-in-kind (PIK) interest marginally decreased in Q1 2026 to 3.9%.
- Non-accruals are moderately high: Non-accruals rose to 1.4% in Q1 2026, driven by smaller borrowers; however, given a defensive deal structure where roughly 90% of loans are first lien at a conservative ~40% loan-to-value (LTV), realized losses are expected to remain below the asset class’ approximately 1% annual loss rate over the last two decades.
- Lower interest rates continue to provide relief: The average underlying corporate borrowers’ interest coverage ratio (EBITDA/interest) marginally improved year over year due to lower interest rates and some EBITDA growth.
- Returns have contracted: Weaker performance in Q1 2026 was driven by a multi-year, gradual compression in loan yields alongside the spike in market volatility stemming from geopolitical tensions and AI disruption, more so than fundamental credit degradation within the underlying funds. In particular, this performance softness was most notable among larger borrowers, whose closer alignment with broader credit market fluctuations resulted in more immediate mark-to-market volatility compared to smaller borrowers. Barring systemic credit events, conditions may improve in Q2 2026 as market volatility normalizes—a view supported by an early recovery in April performance among reporting funds.
The report benchmarks 11 core private credit metrics, including:
- PIK interest
- Non-accruals
- Credit loss (net)
- First lien loan FMV / cost
- Borrower debt / EBITDA
- Borrower interest coverage
- Average LTV
- Debt / equity
- Underperformance
- Loan yield
- Annualized quarterly total returns
Each metric is accompanied by historical trend charts to provide additional context and comparability across market segments.
To read the State of Private Credit Benchmark Report (Q2 2026 updated edition), visit https://heronfinance.com/blog/the-state-of-private-credit-benchmark-report-q2-2026-updated-edition/
About Heron Finance
Heron Finance provides individual investors and family offices with diversified private market investment portfolios, offering exposure to 27+ funds and more than 10,000 underlying private credit, private equity, private infrastructure, and private real estate investments.
Through a fully digital investing experience, Heron Finance enables access to private markets with low minimums, monthly subscriptions with no capital calls, no multi-year lockups, institutional access, and a single consolidated tax form.
Individual investors can invest with Heron Finance in three steps: receive a personalized portfolio recommendation, fund an investment through a standard or IRA account, and monitor returns and portfolio composition on an ongoing basis.
Learn how to invest in private markets at heronfinance.com.
Media Contact:
press@heronfinance.com
State of Private Credit Benchmark Report data sources:
All metrics are calculated as of Q1 2026 as the median quarterly fund data, based on SEC filings and fund reporting from 69 private credit funds managed by firms with greater than $1 trillion in aggregate private credit AUM. Lower MM refers to lower middle market companies, which report annual EBITDA of less than $25 million; core MM refers to core middle market companies, which report annual EBITDA greater than $25 million but less than $75 million; and upper MM refers to upper middle market companies, which report annual EBITDA greater than $75 million.
Disclosure:
Any financial forecasts or returns are for illustrative purposes only and are not guarantees of future results. Private credit investments involve risks, including credit, liquidity, and interest-rate risk. Investors may lose principal and accrued interest in the event of borrower default.
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SOURCE Heron Finance
