Investing.com -- Goldman Sachs reported that credit trends in the direct lending industry remain relatively stable based on an assessment of approximately $500 billion in private loans, representing about one-third of the sector.

Non-accruals in the assessed portfolio are tracking below historical averages at less than 2%, according to the bank's analysis. Payment-in-kind and watchlist trends also remained stable.

Activity levels are beginning to recover, with third-quarter sponsor-led activity showing improvement compared to second-quarter levels. Direct lending spreads are currently about 50 basis points higher than the tight levels seen in 2025.

Goldman Sachs expects third-quarter retail data to show a decline in redemption requests to around 10% from approximately 15% in the second quarter. The bank noted that most non-traded business development companies will likely post net outflows through the first quarter of 2027.

The bank identified TPG, Brookfield Asset Management (NYSE: BAM), StepStone Group (NASDAQ: STEP), and BlackRock (NYSE: BLK)/HPS as best positioned among firms with better trailing twelve-month returns, smaller back books, and lower redemption queues.

Goldman Sachs stated that most non-traded business development companies are underperforming liquid benchmark returns on a year-to-date basis. The bank noted that managers with substantial institutional undeployed capital, such as Ares Management (NYSE: ARES), are positioned for faster growth.