$SPXTR: S&P 500 Total Return
Beyond the S&P-500/US Large Cap Growth, US Large Cap Value and US Small Cap rallied to start the quarter:[iv]
$SPXTR: S&P 500 Total Return | IWD: iShares Russell 1000 Value Index | $RU2000TR: Russell 2000 Total Return
Advisors love to talk about the “lost decade” of 2000 through 2009 when discussing the benefits of diversification and why investing beyond just the S&P-500 is important. During that period, the S&P 500 lost over 9% while a globally diversified portfolio was up over 21%. While true (diversification is good all the time), the problem is the “lost decade” ended almost 20 years ago.[v]
$SPXTR: S&P 500 Total Return | IWD: iShares Russell 1000 Value Index | $RU2000TR: Russell 2000 Total Return | $MSACWI: MSCI ACWI Index
We might not be in a lost decade yet, but we did have a lost quarter in the US for S&P-500 only investors. Growth stocks can’t grow forever, and there is a limit to how far investors are willing to allocate to technology companies, especially as the impact of AI is still being assessed.
Beyond the equity market, there has been much talk about private credit. As the name implies, private credit comprises loans made by non-bank entities to businesses. Publicly traded companies (e.g., Apple, Nvidia, etc.) have access to capital via public equity and debt markets. Generally, assets that trade publicly are good because they provide liquidity (i.e., you can sell and buy on an exchange daily). And because they trade daily, prices reflect a more accurate representation of an asset’s true value.
On the other hand, many small and riskier companies lack access to public markets. In their case, they raise capital via the private markets. This is the idea behind private equity and venture capital. Unfortunately, private credit lacks liquidity. No one seems to mind when markets are going up. However, that hasn’t been the case lately.[vi]
Blue Owl Capital investors attempted to redeem 22% of a private credit fund last quarter. Redemptions have historically been capped at approximately 5%.[vii] Current redemptions suggest that investors no longer believe that private credit’s reported values are a true representation of their worth. From an investment perspective, if advertised returns are higher than those of public debt and corporate bonds (investment grade or high yield), it means they’re riskier. That doesn’t mean it’s a bad investment. It just means an awareness of what you’re buying and how much is important.
Dimensional Fund Advisors research also highlights that for certain private investments – sometimes the public market proxy can provide higher returns:[viii]
For assets below the 1.0 horizontal line (e.g., High Yield), investors have historically outperformed private credit. This suggests that private credit returns can be achieved without sacrificing liquidity.
Perhaps more importantly, is private credit risk introducing systemic risk into the broader banking ecosystem? The growth in the size of private credit makes it a question worth asking.[ix]
The growth is likely a combination of banking regulation and a lack of access to traditional lending.[x]
The risk is that, while banks aren’t lending directly (that’s the point), they may be lending to private credit providers and business development companies (BDC), exposing their balance sheet to the risks after all. That said, according to JP Morgan, lending to Business Development Companies (BDCs) only accounts for 12.5% of total bank lending.[xi] This is far lower than the 53% of bank lending allocated to real estate prior to the 2007/2008 Global Financial Crisis. The Federal Reserve Bank of Boston provides a similar perspective:
As an investor, if I really wanted access to private credit in my portfolio, I would look to the more liquid high yield credit. Are we on the precipice of another Global Financial Crisis? Probably not (at least from private credit). But I’ll put it on my bingo card just to make sure it doesn’t happen.
Thanks as always for reading. If you have any questions or want to discuss your portfolio, please don’t hesitate to reach out!
Andrew Christopher, FCA® | CIO & Lead Planner
Leading Edge Financial Planning
andrew@leadingedgeplanning.com
865-240-2292 Office
901-664-3753 Cell/Text
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[i] Source: Yahoo Finance
[ii] https://advisors.vanguard.com/insights/article/the-potential-impact-of-high-oil-prices-on-economies?
[iii] Source: Kwanti. This application is for informational purposes only and does not constitute advice for investment or trading. Past performance is no guarantee of future results. The information and analysis contained herein does not constitute investment advice offered by Kwanti and Morningstar, and is not warranted to be correct, complete or accurate. Kwanti and Morningstar are not responsible for any damages or losses arising from use of this information and analysis. Asset allocation data ©2026 Morningstar. All rights reserved. The asset allocation data contained herein is proprietary to Morningstar and/or its content providers.
[iv] S&P-500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization. IWD: The iShares Russell 1000 Value ETF seeks to track the investment results of an index composed of large- and mid-capitalization U.S. equities that exhibit value characteristics. Russell 2000 Index: The Russell 2000® Index measures the performance of the small-cap segment of the US equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index which is designed to represent approximately 98% of the investable US equity market. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.
[v] The MSCI ACWI captures large and mid cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries*. With 2,515 constituents, the index covers approximately 85% of the global investable equity opportunity set. For a complete description of the index methodology, please see Index methodology – MSCI.
[vi] https://my.dimensional.com/public-proxy-for-private-credit
[vii] https://www.wsj.com/finance/investing/blue-owls-36-billion-private-credit-fund-hit-by-22-withdrawal-request
[viii] In USD. This figure shows weighted averages across vintages of the average fund’s lifetime KS-PME by asset class and benchmark. The averaging is across vintages with weights determined by inflation-adjusted total committed capital (using US CPI and expressed in 2022Q4 dollars). All cash flows and NAVs are net of management and performance fees. The sample is all North American, closed-end private funds reporting in USD from the Burgiss Manager Universe, excluding funds-of-funds. Data are quarterly, end with 2022, and start in 1980 for venture capital, 1986 for buyout, and 1993 for private credit and private real estate. https://my.dimensional.com/a-deep-dive-into-private-fund-performance
[ix] https://www.bostonfed.org/publications/current-policy-perspectives/2025/could-the-growth-of-private-credit-pose-a-risk-to-financial-system-stability.aspx
[x] https://www.alliancebernstein.com/corporate/en/insights/investment-insights/private-credit-what-it-is-and-where-it-fits.html
[xi] https://privatebank.jpmorgan.com/apac/en/insights/markets-and-investing/private-credit-under-the-microscope-separating-headlines-from-fundamentals
