Amid increasing caution over private credit, US public funds are expected to focus on de-risking their portfolios in 2026, according to a senior private credit advisor and a senior portfolio manager.

“Today, we’re cautious on private credit,” said the senior portfolio manager who oversees private credit and infrastructure investments at a US state sovereign wealth fund.

While there are some upticks in defaults and non-accruals, they are not at an elevated level to indicate that there’s something imminent happening, the senior portfolio manager said. However, there are some concerns around the amount of capital that’s been raised by these funds, which are chasing a limited opportunity set in a subdued M&A market, he noted.

“We don’t love that dynamic,” said the senior portfolio manager.