Goodwin Warns of Software-Loan Reckoning in Private Credit at Sohn 2026

Scott Goodwin, founder and portfolio manager at Diameter Capital Partners, opened his Sohn New York 2026 pitch on May 12 with a question the private credit industry has been dodging: “What the fuck is going on in private credit?” He laid out three distinct opportunities, CLO equity at attractive spreads, private credit secondaries trading at steep discounts, and a short position targeting business development companies loaded with software loans facing AI-driven obsolescence. The thesis rests on a structural flaw Goodwin said has plagued the asset class since COVID: portfolio construction failures that put 30 to 40 percent of industry capital into a single sector just as technology change accelerates.

Diameter manages $3 billion across credit-focused strategies. The firm runs its own BDC and has operated secondary market strategies since 2017. Goodwin’s pitch spanned three specific trades and one overarching warning: private credit managers built industrial-scale deployment platforms during the fee boom of 2021-2023, concentrated exposure in asset-light software borrowers, and are now sitting on marks that don’t reflect reality. The teaser: Diameter reduced its own software exposure to 5 percent by 2023 and went short select BDCs in 2025. The payoff for those positions is arriving now.