I recently had the opportunity to speak with James Murphree the CEO & Economist at Murphree Investment Group, and it turned into one of those conversations that stays with you. We covered two topics that, at first glance, do not seem connected: private credit and silver.
One is a 3.4 trillion dollar yield engine embedded deep inside institutional portfolios. The other is a 5,000 year old monetary metal that also happens to sit inside solar panels, EVs, semiconductors, and AI hardware.
Yet both sit squarely in today’s alternatives universe. And both are telling us something about where we are in the cycle.
Private Credit: Smooth Until It Is Not
Private credit has grown into a 3.4 trillion dollar asset class as of 2025, with projections pushing toward 4.9 trillion by 2029. It filled the gap left when traditional banks stepped back from middle market lending. For allocators, the appeal was obvious: floating rate income, higher yields than public credit, covenant protections, and perhaps most attractive of all, low reported volatility.
But as James outlined, the key word there is reported.
Headline default rates in Q4 2025 sit around 2.46 percent. That sounds manageable. Comfortable, even. But when you broaden the definition to include PIK interest elections, stressed maturity extensions, and covenant waivers, often referred to as shadow defaults or broader stress measures, the effective stress rate jumps closer to 5.7 to 6.4 percent depending on the dataset.
That is not a rounding error. It is more than double.
Payment in kind interest now accounts for over 8 percent of total income across BDCs, roughly double pre Covid levels. When borrowers stop paying cash interest and instead add it to principal, it may not technically be a default, but it is rarely a sign of strength.
We also discussed the 2026 to 2028 maturity wall. A meaningful concentration of loans, many underwritten in 2021 at 6 to 8 times leverage and near zero base rates, will soon need refinancing in a 4 to 5 percent SOFR world. Interest coverage ratios that once looked fine at 3.0 times now sit closer to 2.1 times on average in private credit portfolios, compared to roughly 3.9 times in public markets.
Leverage did not go away. Rates just went up.
None of this means private credit implodes tomorrow. But it does mean dispersion is coming. The era of steady 9 percent income with no drama may give way to an environment where manager selection, vintage risk, and sector exposure actually matter again.
Low volatility can sometimes be a function of quarterly marks. Markets tend to reprice reality faster than spreadsheets do.
Silver: Industrial Muscle Meets Monetary DNA
Then we shifted to silver. If private credit represents financial engineering at scale, silver represents physical throughput.
Silver demand is increasingly being driven by hard industrial usage. Solar installations continue to expand globally. Electric vehicles use significantly more silver than internal combustion vehicles. AI data centers, grid infrastructure, and advanced electronics all require highly conductive materials. Silver sits at the center of that ecosystem.
Unlike prior cycles where silver largely followed gold as a sentiment trade, this time industrial demand is structurally meaningful. The energy transition alone has created a persistent demand bid that is not purely speculative.
At the same time, supply growth has not exactly exploded. Mining output is constrained, project timelines are long, and above ground inventories are not infinite. So you have a metal that carries monetary optionality. It historically responds to liquidity cycles and currency debasement, while simultaneously being pulled by real industrial demand.
It is part inflation hedge, part electrification metal, part volatility instrument.
Silver is not the poor man’s gold. It is more like gold’s caffeinated cousin. When it moves, it tends not to ask permission.
Two Sides of the Same Macro Coin
What made the conversation compelling was the juxtaposition. Private credit is now large enough to matter systemically. When you have more than 3 trillion dollars of relatively opaque, lightly marked loans sitting in institutional portfolios, stress inside that system becomes macro relevant.
Silver, on the other hand, sits outside the financial engineering layer. It is not dependent on refinancing windows, covenant waivers, or sponsor equity injections. One relies on capital markets functioning smoothly. The other relies on electrons moving.
As we move deeper into a higher rate, structurally tighter liquidity regime, assets that were built for zero percent money begin to show strain. At the same time, assets tied to physical demand and monetary hedging begin to look structurally interesting again.
That does not mean private credit is uninvestable. It means underwriting discipline, transparency, and vintage exposure matter more than they did three years ago. And it does not mean silver goes straight up. It means the demand equation today is different than it was in 2016.
The Bigger Alternative Allocation Question
Alternatives are evolving. The post 2008 era was about yield extraction and financial engineering. The next phase may be about resilience, structure, and real assets.
Private credit is entering its dispersion phase. Silver may be entering its structural demand phase.
Two very different assets. Two very relevant conversations. One common theme: the cycle has turned.
And in alternatives, cycles matter.
