The $1.8 trillion private credit market has long been the darling of the shadow banking world — a sleek, supposedly safer alternative to the messy public markets. But as of March 2026, the cracks are going deep and wide. JPMorgan Chase, titan of American banking, is tightening the leash on private credit funds after marking down the value of loans within their portfolios.

For years, Wall Street banks have acted as the ultimate enablers, providing the cash that fuels these funds by using their loan portfolios as collateral. It was a cozy arrangement: banks offloaded the direct risk of high-yield borrowers to these private lenders while still skimming off the top through financing. But that cycle is hitting a snag. When the value of those underlying assets drops, the bank’s ability to lend drops with it. 

It’s a classic margin squeeze, and it’s hitting where it hurts most: the software sector.

Software companies have historically been the golden geese of private credit, providing the consistent cash flow that lenders crave. However, the winds have shifted. Investor anxiety over the disruptive potential of artificial intelligence has cast a long shadow over traditional software valuations.

While most lenders wait for a “trigger” event — like a missed payment — to admit a loan is worth less than they thought, JPMorgan is playing a different game. They’ve maintained the right to revalue these assets at any time, a move that has caught many in the industry off guard. The bank’s leadership has signaled a new era of prudence, specifically regarding software assets, suggesting that the once-booming days of opaque pricing and undisclosed risks are finally reaching a reckoning.

This isn’t just a valuation problem on a balance sheet; it’s a liquidity problem. Retail investors, sensing blood in the water and spooked by the dual threats of AI-driven disruption and shaky underwriting standards, are heading for the exits.

• Cliffwater LLC recently saw redemption requests top 7% for its flagship fund.
• Heavyweights like BlackRock, Blackstone, and Blue Owl face similar demands from nervous investors.
• JPMorgan’s own exposure to this sector sits at a staggering $22.2 billion.

The strategy of offloading risk to private lenders is “wobbling,” punctuated by the recent high-profile collapse of UK mortgage lender Market Financial Solutions (MFS). MFS, which had billions in backing from major global players, essentially evaporated in late February, proving that even “short-term bridge loans” aren’t safe when the foundation is built on sand.

The Bottom Line

The private credit industry has lived in the dark for a long time, enjoying a lack of transparency that public markets simply don’t allow. But as the “cockroaches” begin to surface — to borrow a phrase from the bank’s leadership — the industry is finding that even the most sophisticated algorithms can’t hide a bad loan forever. When the biggest bank in the room starts marking down your homework, it’s usually a sign that the party is over.