Howard Marks Warns Private Credit Faces First Post-2008 Test

Howard Marks, co-founder and co-chairman of Oaktree Capital, has warned that the private credit market is facing its first significant test since the 2008 Global Financial Crisis.

In a memo sent to Oaktree clients on April 9, 2026, Marks highlighted growing concerns regarding direct lending, a sector that has expanded to approximately $2 trillion.

The investor identified several specific pressures currently affecting the market, including defaults, limits on Business Development Company (BDC) redemptions, and debt held by software companies impacted by artificial intelligence.

Rapid Sector Expansion

This caution follows a period of rapid growth in the industry. On March 5, 2026, Marks stated on CNBC that direct lending had ballooned to a market exceeding $1 trillion from its early development around 2011.

While the growth has been substantial, Marks noted that the risk primarily stems from the pace of this expansion, which he suggests could expose lenders with weaker credit analysis when market conditions shift.

Sentiment toward direct lenders has decreased following the collapse of auto-related borrowers First Brands and Tricolor.

Software Debt and AI Disruption

Much of the current market anxiety focuses on loans provided to software firms. Investors are concerned that artificial intelligence could disrupt these businesses, potentially leading to higher default rates.

Marks referenced a common industry adage during his March 5, 2026, appearance on CNBC: the worst of loans are made in the best of times.

He added that after 17 years of favorable conditions, the market will eventually reveal whose credit analysis was discerning, who made fewer software loans to the better company.

Market Impact and Systemic Risk

Despite these warnings, Marks clarified on March 5, 2026, that There’s not a systemic problem with private credit.

However, the pressure is already manifesting in investor behavior. In the most recent quarter, investors withdrew nearly 8% from the flagship private credit fund of Blackstone Inc.

Marks noted that it is impossible to predict the exact timing of a cycle turn, stating that the most profound effects on the investment world usually come from unforeseen events that cannot be factored into prices beforehand.