Investor anxiety around private credit has increasingly centered on business development companies with outsized exposure to software and other fast‑moving tech names. For Todd Stender, managing director at LNL Capital, that focus risks missing the asset class’s internal fault lines—and its strengths. Stender argues that some technology subsectors, particularly software, lack the downside protection of physical collateral and often face limited visibility into long‑term cash flows as business models evolve. By contrast, real estate and other industries anchored by tangible assets and contractual income streams continue to offer durable performance characteristics. Within commercial real estate, he sees net lease private credit as a distinct niche, backed by hard assets, long‑term leases, and first‑priority positions that can help insulate lenders from volatility elsewhere in the market. CM: Many investors seem to be extrapolating software concerns to the broader private credit market. How do you characterize the disconnect between headline fears and what you’re seeing on the ground? TS: The disconnect stems from an overly broad categorization of private credit. Much of the recent headline fears are driven by software-oriented BDC-type credit, often collateralized by potentially volatile enterprise value or intangible assets.1 Net lease private credit, however, operates under a fundamentally different risk profile. On the ground, we see stability because net lease’s collateral is the physical, essential and mission critical commercial real estate itself, as opposed to potentially shifting valuations in software. Investors are conflating corporate cash-flow risk with real estate-backed security – two fundamentally different risk profiles. CM: Private credit is often discussed as a single, monolithic asset class. How do you think about segmenting the market by risk profile across industries? TS: Private credit is, by definition, customized contracts between lenders and borrowers, so it’s more useful to segment it than to group it as a single asset class. Further segmenting by tangible vs. intangible assets, quality of collateral, and expected recovery in the event of a default is required. On one end, you have enterprise-value lending, common in BDC-type credit where risk can be tied to intangible assets and intellectual property. If the business fails, the collateral can quickly erode. On the other end is net lease private credit, segmented by secured, tangible assets. In this segment, the risk profile is anchored by commercial real estate and typically long-term contractual rent. By separating mission-critical physical assets from corporate cash-flow volatility, we believe there to be a more resilient risk-adjusted return profile. CM: Even within commercial real estate, you’ve said risk profiles “vary dramatically.” Which CRE subsectors do you see as most cyclical or structurally challenged versus more resilient? TS: We view CRE through the lens of occupancy necessity and structural durability. The office space stands out as one of the most structurally challenged property types, as remote work and shifting tenant demand undermine the long-term predictability that is a core tenet of net lease real estate. By contrast, some of the most resilient CRE segments are net lease industrial (e.g., distribution, logistics, and manufacturing) and essential retail (e.g., quick-service restaurants, gas & convenience stores, automotive services, and dollar stores). These subsectors remain critical to tenants’ operations. Focusing on net lease assets within these categories, we prioritize long-term, contractual cash flows that are generally more insulated from broader economic volatility affecting more speculative or potentially obsolete real estate. CM: You’ve highlighted net lease private credit as a more durable niche. What structural features make it more resilient in the current environment? TS: The resilience of net lease private credit stems from its triple-net (NNN) structure and senior position in the capital stack. Unlike traditional corporate debt, net lease private credit returns are backed by long-term leases where the tenant covers all operating expenses (i.e., taxes, insurance, and maintenance); this shields the investor from the inflationary pressures affecting other CRE sectors. At the same time, contractual rent from essential businesses combined with the underlying real estate value provides a durable floor that reinforces downside protection. CM: Where are you seeing the most compelling opportunities in asset-based lending right now? TS: We see the most compelling private credit opportunities today lie within industrial and essential retail real estate, particularly as traditional banks continue to retreat. Tighter Basel III capital requirements and increased regulatory scrutiny have reduced banks’ appetite for balance-sheet intensive financing, especially construction lending, creating a financing gap for developers of newly built, mission-critical properties.2 LNL Capital is well positioned to fill this void by providing credit secured by tangible assets such as distribution facilities and quick-service restaurants. By stepping in where banks are capital-constrained, we are able to capture returns backed by physical real estate, offering a more resilient risk-adjusted profile than the enterprise-value lending prevalent in the broader private credit market. CM: Looking ahead, do you expect investor capital to shift more toward asset-backed strategies and away from cash-flow-dependent sectors like software? TS: In light of the market’s tighter scrutiny of BDC-type private credit, we would expect a gradual rotation toward strategies backed by physical assets as the market matures and differences across private credit segments become clearer. While software-centric credit thrived in a low-rate, high-growth environment, the current backdrop favors the certainty of collateral.3 Investors are increasingly weary of unsecured exposure that can deteriorate quickly in a downturn or even in the perception of one. As institutional allocators prioritize capital preservation, the shift toward net lease private credit may accelerate. The added protection of an alternative path to value realization provides a structural margin of safety that most asset-light sectors cannot replicate. Endnotes 1. Private Credit Under the Microscope – Separating Headlines from Fundamentals: Private Credit Under the Microscope – Separating Headlines from Fundamentals | J.P. Morgan Private Bank Latin America EN 2. Federal Banking Agencies’ Basel III Endgame Mulligan: https://www.debevoise.com/insights/publications/2026/03/federal-banking-agencies-basel-iii-endgame-mullig 3. Technology Procurement and IT Solutions Consulting Sector M&A Transactions and Valuations: https://jahaniandassociates.com/technology-procurement-and-it-solutions-consulting-sector-ma-transactions-and-valuations/ The post Private Credit Isn’t One Trade: Why Asset-Backed Strategies Still Hold Up appeared first on Connect Money. Source: https://www.connectmoney.com/stories/pr ... l-hold-up/