Issue 02 · October 2026
Titanbay's read on what is actually moving in private markets, and what it means for the people who have to operate through it.
The month in five numbers
The easy read of early autumn is that private markets are simply waiting, as they have been for two years, for rates to fall and exits to reopen. The harder read, and the more accurate one, is that the conditions the market has been counting on are now moving the wrong way, and doing so together.
Over the past month, hawkish talk became action. The Federal Reserve and the Bank of Japan both raised rates within days of each other, while private credit, the release valve the industry has leaned on for liquidity, posted a record default rate. Redemption pressure in semi-liquid vehicles eased slightly, but gates are still binding. Neither development is a crisis on its own. The concern is that they are lining up rather than cancelling out.
At Jackson Hole in August, new Fed Chair Kevin Warsh said underlying inflation had not meaningfully improved. On 16 September the Fed followed through, raising the federal funds rate by 25bp to a target range of 3.75% to 4.00%. The vote was unanimous, and the updated dot plot showed the median official expecting one further hike before the end of 2026. Warsh described the move as removing a dose of accommodation, and markets did not take it as a one-off, with the 10-year Treasury yield climbing back to 5% as his press conference ended.
Japan moved two days later. Having held in July, the Bank of Japan raised its policy rate by 25bp to 1.25% on 18 September, its highest level since 1995, in a split 7-2 vote. The bank signalled it will continue to raise rates in response to economic and price developments, and flagged the Middle East, AI demand and currency moves as factors it is watching. Underneath the individual decisions sits a broader shift, as markets wake up to sovereign debt loads and the pressure they place on the cost of capital everywhere.
For private markets, the read is straightforward. The sequence most managers had pencilled in, where rates ease, refinancing gets cheaper and distributions recover, has moved further out. With at least one more Fed hike signalled for this year, sponsor financing costs stay higher for longer, just as the market can least afford it.
Private credit is the other big mover, and the stress is now showing up in the headline numbers. Fitch’s trailing 12-month US private credit default rate rose to a record 6.3% in August, up from 6.1% the month before, with the highest monthly count of default events in the past year.
How worried to be depends partly on who is counting. Published default rates vary widely across providers, largely because of whether distressed exchanges and maturity extensions are treated as defaults. That gap is itself a signal: the broader the definition, the worse the picture.
The part worth pausing on is the disconnect with pricing. Credit Benchmark’s review of major US funds points to narrowing loan spreads alongside rising default risk this year. Realised risk is climbing while pricing has yet to follow, which is an unusual gap and not one that tends to persist. A further watch item sits inside the loan books themselves, where software loans make up a large share of many funds’ exposure, the same segment widely seen as exposed to disruption from AI.
The stress is most visible in the semi-liquid retail vehicles built to widen access to private markets. Third-quarter tender results show some relief, but not much. Across the 19 non-traded NAV BDCs that have reported, requests totalled $13.8bn, or 11.5% of tender offer NAV, down from 12.7% in Q2. Funds met around 40% of requests, leaving roughly $8.2bn unmet, against $9.8bn in Q2. At the fund level, pressure remains acute: Blue Owl Technology Income Corp. reported Q3 requests equal to 39% of shares outstanding.
Requests are still running at more than twice the standard 5% quarterly cap. There is a quiet irony in how those caps behave. A mechanism designed to prevent a rush can end up encouraging one, since a binding cap gives every investor an incentive to be first in the queue. That makes the dynamic partly self-fulfilling, and it turns a tool meant to protect the fund into a signal that can accelerate the very behaviour it was built to contain. The modest easing in Q3 is welcome, but a queue that is shrinking slowly is still a queue.
The broader liquidity picture has not materially shifted. The barbell pattern of fewer, larger deals persists. The exit backlog is still there, with Bain counting some 32,000 unsold private equity-backed companies worth around $3.8tn, and distributions relative to NAV remain depressed, as at the end of 2025. What has changed is the backdrop against which all of that has to be worked through. The same slow exit environment now carries a harder monetary and credit layer on top of it, which leaves less room for the workarounds the market has come to rely on.
Three things will tell us whether this reads as a rough patch or as the start of something more serious.
First, whether the Fed delivers the further hike its dot plot signals before year end, and whether the Bank of Japan moves again at its next meeting, scheduled for 30 October. Back-to-back tightening would compound both the financing cost problem and currency risk.
Second, whether Q4 tender offers continue the slight easing seen in Q3, or whether queues rebuild. Sustained gating would mean a second and more direct liquidity channel staying constrained, beyond NAV loans and secondaries.
Third, whether private credit spreads finally reprice for the default and redemption risk now visible. The longer that gap stays open, the sharper the adjustment when it closes.
For asset managers, the practical implication is that liquidity planning needs a longer horizon than the consensus timeline assumes, and that exposure to semi-liquid credit deserves a fresh look under a redemption stress lens. For allocators, it argues for asking not just whether a manager can return cash, but through which channel, and how that channel behaves when several of them tighten at once.
Private Markets Pulse returns next issue.
This article is for information purposes only. It reflects the personal views of the author, which may change without notice. They do not necessarily represent the views of Titanbay. Nothing in this article is investment, legal, tax or other advice. It is not investment research, a recommendation, or an offer or solicitation to buy or sell any financial instrument or invest in any fund. It does not take account of any reader’s objectives, financial situation or needs.
Investing in private markets involves significant risk. You may lose some or all of the capital you invest, and these investments can be illiquid. Past performance is not a reliable indicator of future results. Any forward-looking statements are the author’s opinion and are not guaranteed.
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