Cycle on May 26, 2026

Let me start by reviewing what's already been covered and what threads are open.

Good — I can see the landscape. There are 23 existing notes covering a lot of ground: the redemption wave, FS KKR's $560M loss, JPMorgan's markdowns, SCOTUS/401(k), short sellers vs PE insurers, the MFS fraud collapse, and more. There's one open thread on the FSB bank-interconnectedness recommendations and potential regulatory follow-through. Let me now search for what's new and fill gaps

Let me drill into the most promising leads — the Fitch default rate record, the Weil report, and the institutional investor piece — plus search for anything on the bank interconnectedness thread and new fund raises.

Good material coming in. Let me now drill into the FSB/bank interconnectedness angle, the SRT story, and new fund launches from the major players.

Excellent finds. Let me now drill deeper into the fund-raising specifics and the Apollo fund sale.

Let me get the Apollo MFIC sale story and pursue the FSB regulatory angle further.

Let me chase the Apollo MFIC sale specifics, new fund-raising data, and the FSB report details.

Let me now fetch the Apollo MFIC sale story and the key fundraising data.

Good — several major new angles are emerging. Let me pull the FSB report specifics and the Q1 lending reversal details.

Let me pull the remaining key sources — the FSB report details, Q1 origination data, and the ECB view

Now I have a strong picture of the new angles. Let me write the key findings. I'll start with the Fitch record default rate (refining the existing note), then new notes on the SRT bank-interconnectedness boom, the Apollo MFIC sale / Q1 lending reversal, and the Barron's buyout-exposure breakdown.

Now let me write the SRT/bank interconnectedness finding (this addresses the open thread), the Apollo MFIC sale, and a new note on the Q1 lending reversal.

Now let me write the Apollo MFIC sale + Q1 lending reversal note, then update the institutional allocations note with the Barron's data.

Now let me write a note on the Barron's breakdown of how LBO lending is actually a small fraction of most managers' books — a key piece of the "what investors need to know" angle — and update the institutional allocations note.

Now let me update the institutional investors note with the new specifics and resolve the open thread.

Now let me resolve the open FSB bank interconnectedness thread — we've addressed it with the SRT note — and record a new thread about the Q1 origination reversal before finishing.

Now let me close out the cycle

## Cycle Complete — Summary This cycle surfaced 4 substantive findings and resolved 1 open thread: ### New/Updated Findings 1. **Default Rates Hit Record 6.0%** (updated existing note) — Fitch's April 2026 reading is the highest ever. Added new data on 6.4% bad PIK prevalence, 10%+ portfolio markdowns ≥50%, the 65% distressed-exchange composition of 2025 defaults, insurer exposure ($0.9-1.1T, 23.4% of capital providers), and the FSB's $220B+ bank credit line quantification. 2. **European Banks Offload €438B in Corporate Loan Risk via SRTs** (new) — The SRT market has doubled since 2022. ECB, BOE, and FSB are all sounding alarms about "circles of risks" where banks finance the very SRT buyers that absorb their loan risk. This is the bank-private credit interconnection channel regulators are most worried about. 3. **Apollo Puts MFIC Up for Sale / Q1 Origination Contracts 14%** (new) — Private credit origination shrank 14% in Q1 while bank lending grew 13% — the first meaningful reversal in years of private credit market-share gains. Apollo is exiting its publicly traded $3B BDC (MFIC, default rate 5.3%) while pulling in $115B in institutional inflows. Gundlach called out the "troubled assets" vs. "bargains" contradiction. 4. **Buyout Lending Is a Fraction of Most Managers' Books** (new) — Barron's quantitative breakdown: LBO lending is 3% at Apollo, 5% at KKR, 13% at Blackstone, but 43% at Ares. The stock selloff may be punishing firms for exposure they don't actually have. The real growth story is data centers, AI infrastructure, and investment-grade private credit. ### Updated 5. **Institutional Allocations Continue** — Added Q1 2026 specifics: Connecticut $300M to Sixth Street, Ares $20B Q1 raise (oversubscribed credit funds), Apollo $115B Q1 flows, evergreen AUM trajectory ($349B in 2024 → $4.1T projected by 2030). ### Threads - **Resolved**: FSB bank-interconnectedness thread — addressed via the SRT note and updated default/systemic risk note. - **New**: "Has the Private Credit-to-Bank Lending Pendulum Reversed?" — tracking whether Q2 data confirms the Q1 14% contraction as a durable trend.