Large private credit firms that have loosened their underwriting standards to boost deal flow could come under pressure in a challenging macroeconomic environment, Adams Street Partners’ head of credit underwriting has warned.
Speaking to Alternative Credit Investor, Fred Chung predicted that global uncertainty has increased the chances of a recession in the US, prompting a need for heightened due diligence.
“You have some very large private credit lenders out there that, to their credit, have raised an immense amount of money and continue to do so,” he said.
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“Putting all that money out puts some pressure on lenders to just frankly do deals. And we think that can be dangerous if you can’t modulate that in the right way.”
Chung suggested that lenders who have been more discerning in their approach will fare better in a worsening economic climate.
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“I do think those that have been picky, those that have been very diligent in researching and underwriting with a lot of depth, the business models that they’ve put in the portfolio will perform better over the medium term than those that have emphasised volume and flow,” he added.
Chung’s comments come as the latest PitchBook data revealed that large private credit deals dominated the fourth quarter of 2025, driving US direct lending volumes to their highest levels since the second quarter of 2024.
The recent high-profile bankcruptcies of subprime auto lender Tricolor and auto parts manufacturer First Brands have raised firms’ underwriting processes into question, amid concerns of loosening borrowing conditions.
However, overall demand for private credit loans continues to outstrip supply.
