Why LPs in Private Credit Deserve Clearer Borrower Reporting
“In a segment where billions of dollars depend on confidence and trust, stronger data isn’t a luxury — it’s the foundation of credible risk governance. ”
Recent market tremors have once again highlighted the extent to which weak borrower reporting and poor data practices can obscure growing risks in private credit. To get a granular, company-level view of a private-credit portfolio, limited partners (LPs) depend on their general partners (GPs) to both collect and report relevant borrower-specific metrics. LPs can’t afford to take either of these activities for granted.
That LP dependency makes transparency both a practical and strategic imperative. But too often, those data pipelines are incomplete. While lenders themselves will generally have a detailed grasp of each borrower’s situation, that is no guarantee that LPs will receive this information in a structured or consistent format.
Looking into the gaps in private-credit data disclosure, we see that a sizeable number of managers:
- Do not disclose borrower-level financials (e.g., EBITDA, leverage, coverage ratios)
- Provide little information on the quality of underlying collateral
- Offer only limited visibility into covenant compliance or asset-level performance
“In effect, investors are flying blind at precisely the time when vigilance matters most.”
Without such granular borrower data, LPs cannot independently assess credit quality, concentration risk or emerging stress within their portfolios, even though these are foundational to risk management. In effect, investors are flying blind at precisely the time when vigilance matters most.
That information gap is not inevitable. LPs can (and should) make portfolio monitoring and disclosure central to their GP due diligence. A GP’s ability and willingness to deliver standardized, structured and comprehensive data should influence investment decisions in the same way that self-reported underwriting records or return history do. After all, a manager’s approach to reporting can open meaningful discussions during due diligence about how seriously it takes risk management. Where GPs fall short, LPs are well positioned to push for improvement.
Admittedly, even the best reporting may not expose deliberate concealment or fraudulent borrower behavior. However, when managers do provide consistent borrower-level reporting, the benefits compound. Structured data enables analytics that can turn raw figures into decision-ready insights: private-credit risk models, implied credit ratings, probability-of-default and loss-given-default modeling, and ultimately stress testing under macroeconomic or sectoral shocks. Some of these capabilities are already becoming reality through initiatives such as the partnership between MSCI and Moody’s Corp., which demonstrate how standardized data can unlock transparency without sacrificing confidentiality.
Armed with this kind of information, LPs can move from reactive oversight to proactive risk management, anticipating trouble and modeling it before it (inevitably) strikes. Without this vital information, they can’t truly assess their GPs’ risk-adjusted performance.
In a segment where billions of dollars depend on confidence and trust, stronger data isn’t a luxury — it’s the foundation of credible risk governance. As private credit moves further into the investment mainstream, transparency will be essential to sustaining confidence in the asset class.
Subscribe todayto have insights delivered to your inbox.
Rethinking Access to Private Equity
We present an index that uses listed securities to reflect the drivers of private-equity returns, aiming to help bridge the gap between private and public markets.
The MSCI Private Credit Factor Model
Investors in private credit contend with the challenges of opacity and illiquidity of the asset class and a dearth of public proxies. Our new model aims to illuminate this market.
The content of this page is for informational purposes only and is intended for institutional professionals with the analytical resources and tools necessary to interpret any performance information. Nothing herein is intended to recommend any product, tool or service. For all references to laws, rules or regulations, please note that the information is provided “as is” and does not constitute legal advice or any binding interpretation. Any approach to comply with regulatory or policy initiatives should be discussed with your own legal counsel and/or the relevant competent authority, as needed.