Private credit managers turn to data-driven monitoring

By Aarav Garg

Private credit is continuing to mature, and a new Allvue Systems monitor suggests that one of the clearest signs is a weakening of traditional lender protections. The firm’s latest Private Credit Monitor reviewed 1,933 loans originated between 2022 and mid-2025 and found a marked decline in the use of covenant structures across the market.

According to the analysis, around 75% of new private credit loans in 2022 included a basic debt-to-earnings covenant. By the first half of 2025, that figure had fallen to 47%. Cashflow-based tests, which are designed to flag borrower stress earlier in the lending cycle, also declined sharply, from 45% of new loans in 2022 to 23% in H1 2025.

The research suggests that leverage and risk are becoming more uneven across deal cohorts. Loans without covenant protections were consistently more highly leveraged than protected loans, with a gap of between 0.7x and 1.7x additional debt relative to earnings across every vintage studied.

For private credit managers, the findings point to a market that is becoming more complex to monitor. As average portfolio metrics remain stable, risk can become harder to spot if firms rely only on broad-level reporting. The data suggests that lenders and allocators increasingly need loan-level visibility to identify where leverage is concentrated and where covenant-lite exposures may be building.

The report also has implications beyond direct lenders. Fund finance providers and institutional allocators may need more granular data and stronger operational infrastructure as borrowing bases become more heterogeneous. In that environment, technology platforms that improve reporting, monitoring and portfolio analytics are becoming more important to credit decision-making.

The broader message is that private credit is no longer just growing in size. It is also becoming more differentiated, making data quality and monitoring capability a bigger part of the risk-management equation.

“What the data shows is a structural shift in how private credit deals are being put together, not an immediate credit crisis,” said Dmitri Sedov, Chief Data & Analytics Officer at Allvue Systems. “Covenants have historically anchored a regular dialogue between borrowers and lenders. As that mechanism evolves, the information flow around credits changes too. The market is adapting, and the firms that adapt fastest will be those that actively monitor borrower performance rather than waiting for a covenant breach to surface a problem.”