Monthly insights: “The good, the bad, and the opportunity” in private markets (December 2025)

Monthly Insights #9, December 2025

In this issue:

• A look back at Heron’s 2025
• 2025 industry wrap up: “The good, the bad, and the opportunity”
• Fund facts: Heron vs peers (New performance report)
• Quote of the month: Bill Belichick on what to focus on

Private markets investing 2025 year in review

To end the year, we look back at the past and the future for Heron, along with offering an “end of the year wrap up” analysis of key events in 2025 and where we see opportunity ahead in 2026.

A look back at Heron’s 2025

2025 has been a busy year at Heron. We’ve made great progress towards our goal of bringing diversified private markets exposure to individual investors, family offices, and RIAs:

• After launching our private credit strategy in 2024, we expanded in 2025 to three distinct strategies, offering exposure to 12 funds and more than 3,000 underlying loans across industry sectors. 
• In November, we introduced our private equity strategy, providing investors access to four established managers—KKR, Carlyle, Ares, and StepStone—and exposure to more than 7,000 portfolio companies across the U.S., Europe, and other regions.
• This past week, we announced that the funds in Heron’s private credit strategy performed strongly compared to our peer group across returns and key risk metrics.

Looking ahead to 2026, we plan to further broaden our platform with additional private markets asset classes to help investors achieve even greater diversification. Keep an eye out for announcements coming in January.

2025 industry wrap up: “The good, the bad, and the opportunity”

The past year was eventful in the world of private markets. The following notable events provide useful insights for investors preparing for 2026.

The good: Private markets vs public markets

Overall in 2025, private markets have performed as expected, with data to support that private assets are positioned well to outperform public markets into the future. 

• Private credit defaults remain below public markets: Despite concerns around the health of private credit in 2025, private credit default rates averaged 2.15% (by volume), remaining well below public credit default rates at 3.33% (for broadly syndicated loans).  Additionally, private credit defaults also remained low relative to its historical average. 
• Private equity has historically outperformed the S&P 500: New research found that over long-term horizons private equity has outperformed the S&P 500 73% of the time over two-year periods and 97% over seven-year periods. This reinforces private equity’s role in generating long-term returns for investors.
• Continued institutional growth in private markets: Preqin recently surveyed 435 institutions and found that 81% plan to maintain or increase their allocations to private credit in the next 12 months. Furthermore, over the next three years, 32% of institutional investors surveyed by Mercer plan to add or expand private market allocations to diversify portfolios and meet return targets. Private equity and private credit dominate projected exposure, with allocations expected to rise 26% and 24%, respectively, over the next three years, alongside other alternative asset classes.

The bad: A few bad apples steal the show

Although private markets are positioned well, two high profile bankruptcies and large losses from a private market investing platform took center stage in the news during much of the year. None of these events indicate any systemic risks.  

• High profile bankruptcies take center stage: Bankruptcies from First Brands and Tricolor captured the headlines in 2025, but as we reported in our October newsletter, one important point that gets missed is that the two bankruptcies are not actually traditional private credit deals. First Brands got financing primarily in the bank loan market (i.e., public credit) and Tricolor got financing from the asset backed securities market (also public credit).
• Yieldstreet lost clients over $200 million: CNBC provided an extensive account of Yieldstreet's (now rebranded Willow Wealth) severe credit losses. In total, Willow Wealth investors have lost at least $208 million, according to CNBC, with nine out of the 30 real estate deals reviewed by CNBC now in default. Like the First Brand and Tricolor bankruptcies, Yieldstreet is not cause for systemic concern. The losses are the result of Yieldstreet poorly sourcing and underwriting its own deals instead of relying on established fund managers, which shows the importance of selecting credit managers who have proven experience (and the benefits of owning a diversified, multi-manager portfolio).

The opportunity: Manager selection and diversification are key in 2026

At Heron, we understand that there is a wide range of quality and risk when it comes to investing in private markets. That's why who and what you invest in, and how you do it, all matter.

• Experienced fund managers drive performance: At Heron, our focus has been on thoughtful fund manager selection, with the idea that we can build investors a broadly diversified portfolio across fund managers, market segments, industry sectors, and loans. 
• Diversification mitigates risk: Unlike firms like Yieldstreet (and other loan syndication or fund distribution platforms), we don’t believe that investing in a single asset, a concentrated portfolio, a single industry sector, or even investing with a single fund manager is the best way to protect or grow investor capital. And our recent performance announcement backs our approach: the diversified private credit funds we offer on Heron returned 9.5% (net of Heron fees), compared to 9.0% (net of fund fees, gross of Heron's fees) for the peer group over the same period.* 

With 2025 coming to an end, we’re more committed than ever to providing you access to private markets assets that outperform the competition. We look forward to helping you reach your investment goals as we expand our offerings at Heron in 2026. 

Happy holidays, and as always, thanks for reading,

Khang Nguyen

Heron Chief Credit Officer

Heron fund facts

Fact: The funds in Heron’s private credit strategies outperformed 57 of the largest U.S. private credit funds across all key metrics that we track since inception.* (See the performance report.)

Why that matters: Our proprietary private credit fund selection process has delivered strong results compared to the market, all while saving investors time through automated, diversified private credit portfolios. 

Quote of the month

“What we can control is our performance and our execution, and that's what we're going to focus on.”

– Bill Belichick

*SEC filings for September 2025. Dataset includes 69 U.S. private credit funds (57 of which are the peer group and 12 of which are the funds on Heron), which are actively managed by firms that collectively manage in excess of $1 trillion in private credit assets across their funds and accounts. Heron return is an annualized return after fees calculated as the average actual returns of all Heron clients from November 2024 to September 2025. Peer Group based on average (mean) of 57 comparable funds. Returns shown after deducting 1% Heron fees.