Mid-Year Outlook: Colbeck Capital on the Next Chapter for Private Credit
Perspectives from Colbeck Co-Founders, Jason Colodne and Jason Beckman, on market dislocation, capital preservation, and differentiated value creation strategies in a maturing asset class.
How would you describe the current macroeconomic environment, and what key trends and challenges should GPs and LPs be watching over the remainder of the year?
Jason Beckman: The macroeconomic environment in 2025 has been unpredictable and disruptive, presenting challenges on a number of fronts. While we hope for a smooth remainder of the year, we expect a level of uncertainty to persist and continue influencing both GPs and LPs.
Private credit as an asset class continues to grow and become increasingly competitive. We are seeing ongoing consolidation at the top end of the sponsor-backed market, with lower yields and reduced diversification, as large managers compete for the same private equity-backed deals. As a result, we expect managers to increasingly explore growth through the retail channel, continuation vehicles, and secondary funds – strategies that sit at the edge of their commoditized core businesses. Differentiation among managers will be key, and we believe it is important for investors to focus on alpha-generating strategies with long track records of successful execution and meaningful realizations across market cycles.
Separately, A.I. and data-driven analytics are reshaping origination, diligence, and portfolio monitoring in real time. Firms that adopt these tools thoughtfully will likely have a meaningful competitive advantage.
We expect continued LP interest in asset-backed lending and specialty finance, and more broadly, in real estate or infrastructure debt. The European market is also attracting increased attention as it continues to expand, offering opportunities for experienced managers who can navigate the legal, currency, and jurisdictional nuances effectively.
Where do you see the most compelling opportunity within private credit in the remainder of the year?
Jason Colodne: Our highest-conviction opportunity today has been the core focus of our business for the past 16 years: the pre-sponsor segment of the market—entrepreneur-led, family-owned, and generational businesses that have not yet been acquired by private equity. These companies are often seeking non-dilutive capital to drive transformative growth and remain underserved by both traditional banks and sponsor-focused lenders.
Borrowers in this segment increasingly recognize that strategically-structured capital solutions can serve as a more aligned growth lever than equity dilution. In many cases, the capital we provide enables businesses to scale enterprise value five to ten times, with borrowers willing to accept what appears to be higher-cost capital due to the long-term strategic upside. We don’t view this as capital of last resort - rather, we view it as equity-alternative capital, deployed with precision, flexibility, and speed.
Our deep origination channels continue to give us access to these opportunities and enable us to generate strong outcomes for both the companies we support and our LP partners.
Private credit has grown to a $1.7+ trillion market and is expected to reach nearly $3 trillion by 2028. How has the rapid growth of the market affected manager selection?
Beckman: The continued growth of the asset class is underpinned by long-term structural trends: persistent bank disintermediation, regulatory pressure from Basel III and Dodd-Frank, and robust borrower demand across the middle market. As the asset class matures, however, performance dispersion among managers is widening. Manager selection is becoming increasingly important – not just based on historical returns, but on platform depth, structuring discipline, and the ability to manage downside risk across cycles.
Colbeck’s investment team has navigated three full credit cycles and multiple market dislocations. We have been executing a consistent strategy for nearly 30 years, and that longevity has shaped what we refer to as “credit technology”—a rigorous, repeatable framework for underwriting, execution, and monetization. Looking ahead, we believe capital will increasingly consolidate around managers who can deliver both principal preservation and alpha generation through varying market conditions.
How are you approaching risk management and capital preservation in an environment of increased economic uncertainty and persistently high rates?
Colodne: In today’s rate environment, prioritizing downside protection is crucial, particularly while ensuring investments are not binary in nature. We underwrite to multiple sources of recoverable value, creating optionality in stressed scenarios. The bespoke nature of non-sponsored lending allows us to negotiate stronger terms, including call protection and robust covenant packages, while also mitigating mark-to-market volatility through a hold-to-maturity approach.
By contrast, in the more competitive sponsor-backed market, the focus often shifts to capital deployment at the expense of structure. These transactions frequently include zero-to-one covenants, offering limited lender protections and leaving investors at the mercy of the private equity sponsor. In such cases, it becomes far more difficult to actively manage risk or help guide a company through challenges or restructurings.
Capital preservation remains the cornerstone of our strategy. We target senior-secured positions with conservative attachment points and sufficient collateral coverage. This structural discipline, combined with comprehensive covenants and bespoke underwriting, has enabled us to avoid principal losses since the firm’s inception in 2009, even through multiple periods of elevated market volatility.
What are your expectations for the second half of the year?
Colodne: As we look to the remainder of 2025, we expect to continue executing the strategic lending strategy on which we founded the firm in 2009. Our approach remains differentiated by the level of operational engagement we bring to each investment. While we are lenders by nature, we operate with the value orientation of a sponsor by partnering with management teams to identify efficiency gains, scale through acquisitions, and support integration efforts.
This value-creation mindset is particularly important in the pre-sponsor market, where businesses may lack institutional infrastructure, but have significant growth potential. Our active involvement enables us to create value alongside management, enhance enterprise durability, and generate asymmetric and idiosyncratic returns for our LPs. It’s a model that blends downside protection with upside participation, in a less saturated and more industry-agnostic market segment.