The Next Risk in Private Credit Isn't Credit

Good morning, !

This week, we're exploring why private credit's biggest challenge may be perception rather than performance, how a $1B+ bet on AI cybersecurity signals where growth investors see the next infrastructure opportunity, and the deals reshaping defense, aviation, and semiconductors. Plus, we highlight why private equity's role in small businesses is being reconsidered—and what it means for the industry's next chapter.

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PRIVATE CREDIT CORNER

Perception Is Becoming Private Credit's Biggest Risk

For the second straight quarter, the biggest concern among private credit participants was not defaults or sourcing. It was reputation.

According to PitchBook, 39.2% of respondents in Q2 and 41.2% in Q1 cited the negative perception of private credit as the industry's biggest headwind over the next six months, comfortably ahead of stress and default risk at 26.1%. The message is clear: investors are becoming more worried about how the asset class is viewed than how portfolios are actually performing.

That is a remarkable shift for an industry built on the promise of stability and downside protection.

As private credit grows larger and moves into bigger, more syndicated transactions, scrutiny is rising around covenant quality, leverage levels, and whether lenders are being adequately compensated for increasingly competitive terms. The irony is that fundamentals have held up reasonably well, yet perception is starting to drive the narrative.

Why it matters: capital flows follow confidence. If concerns around transparency, underwriting discipline, and crowding continue to build, fundraising could become more selective even before credit losses materially increase.

In private credit, the next challenge may not be managing defaults. It may be managing expectations. (More)

MICROSURVEY

DEAL OF THE WEEK

Summit Partners Backs the Infrastructure Behind AI Security

Summit Partners is leading a $1B+ strategic growth investment in Keyfactor, a leader in machine identity and cryptographic security, as enterprises race to secure AI workloads and prepare for the post-quantum era. Existing investors Insight Partners and Sixth Street Growth will retain significant ownership, underscoring continued conviction in the company's long-term trajectory. The capital will fund product innovation, international expansion, and strategic acquisitions.

The investment reflects a broader shift in cybersecurity priorities. Machine identities now vastly outnumber human users, while AI adoption, shorter certificate lifecycles, tighter regulation, and the transition to post-quantum cryptography are turning trust infrastructure into a board-level issue. Keyfactor already serves more than 2,500 enterprise customers, including 50% of the largest banks in the U.S. and Europe and over 40% of the Fortune 100.

For private equity, the takeaway is clear: the next cybersecurity winners may not be the companies protecting endpoints, but the platforms securing the underlying digital trust infrastructure that AI and enterprise computing increasingly depend on. Read more.

DEAL TRACKER

Exail Technologies → Thales | $4.5B
M&A — French defense giant Thales agrees to acquire underwater-drone maker Exail at a €3.9B enterprise value, beating rival bidder Safran with a 44% premium, in a deal that reshapes the European undersea defense landscape. Read more.

easyJet → Castlelake | ~$7.3B (£5.5B)
PE buyout — U.S. investment firm Castlelake reached agreement in principle to acquire UK low-cost airline easyJet at £6.90/share in an all-cash deal, marking one of the largest take-privates in European aviation history. Read more.

Empower Semiconductor → Analog Devices | $1.5B
Acquisition completed — ADI closed its all-cash buy of Empower Semi to bolster AI-era power delivery, strengthening its grid-to-core capabilities across the AI compute ecosystem. Read more.

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