Following my recent article Private Credit at a Crossroads – What leaders are warning, there has been further criticism in the media.
If You ask me: Private credit is under scrutiny. Defaults are rising. Retail inflows have slowed. Redemption gates have appeared. Advisors are publicly questioning underwriting standards.
Yet none of this is unfolding in an informational desert.
The United States possesses one of the most sophisticated credit-information infrastructure in the world. Commercial credit bureaus, trade payment networks, corporate linkage analytics, UCC filings, litigation records, structured finance surveillance — the data architecture is deep and mature. It was built over decades precisely to reduce uncertainty and strengthen credit allocation.
And still, we find ourselves debating deteriorating underwriting discipline. This is the information paradox.
Joseph Stiglitz, Nobel Laureate and former Chief Economist of the World Bank, argued that imperfect or asymmetric information produces unstable and inefficient markets.
His work helped shape global efforts to develop credit-reporting systems, including initiatives supported by the International Finance Corporation to expand credit bureaus worldwide. The objective was straightforward: better information reduces fragility.
The United States does not lack that infrastructure. Why, then, do verification failures continue to surface? The modern asymmetry is more subtle. It is not an absence of data. It is uneven application.
In competitive private-credit markets, speed and flexibility are prized. Capital has flowed into the sector in extraordinary volumes. Spreads have compressed. Leverage has crept upward. Covenant protections have thinned. None of this is hidden; these are classic late-cycle signals. But when capital becomes abundant, incentives shift. The pressure to deploy funds can dull analytical skepticism. Independent verification becomes friction. Sponsor-provided reporting gains weight. Marks are model-based rather than market-tested.
The issue is not that information is unavailable. It is that competitive dynamics can weaken the incentive to use it rigorously.
A behavioral version of Gresham’s Law offers a useful analogy. In currency markets, inferior money can drive out superior money. In credit markets, aggressive capital can crowd out conservative discipline. As yield-seeking funds accept thinner spreads and looser covenants, prudent lenders face a choice: accept diminished returns or step aside. The equilibrium tilts toward optimism.
The result is not immediate failure. It is gradual erosion.
The lesson from 2008 was not solely about bad assets. It was about liquidity. When confidence in valuations and collateral integrity eroded, funding froze. Institutions that appeared sound could not refinance themselves. Liquidity exposed weaknesses that had accumulated quietly.
Private credit today is structured differently, largely outside traditional bank balance sheets. But it depends on confidence just the same — particularly in semi-liquid vehicles that promise periodic redemptions while holding illiquid loans. If investors question underwriting standards or valuation integrity, inflows slow. Redemption pressure rises. Liquidity becomes selective.
Liquidity is confidence made visible. And confidence rests on verified information.
Risk prevention alone rarely motivates change in benign conditions. Deeper verification appears costly when defaults are low and capital plentiful. The stronger incentive is reputational and structural. Managers who can demonstrate disciplined integration of independent data are more likely to preserve funding stability in stress. They are less vulnerable to sudden shifts in investor sentiment. They reduce the probability of regulatory intervention. In a tightening cycle, credibility becomes capital.
This is where the business information industry enters the discussion — not as an observer, but as part of the ecosystem. If underwriting failures repeatedly point to insufficient verification of receivables, collateral linkages, or sponsor representations, the question is not whether data exists. It is whether underwriting processes systematically integrate it.
The United States does not suffer from a shortage of credit data. It risks allowing discipline to erode in its use.
Private credit need not become a crisis story. But it cannot rely indefinitely on optimism, model assumptions, and capital momentum. Markets stabilize when information is not merely available but applied with rigor.
Credit and information are intertwined. The resilience of one depends on the disciplined use of the other.
If you ask me as a veteran of business information for over 50 years, I have seen many credit crises during that period. Many times I was told ‘oh this one is different’, but in the end it came down to uneven application of information. Perhaps these wakeup calls will result in a greater appreciation of the value of information.
Joachim C Bartels, Intrepid Explorers, LLC.