Fidelity Private Credit Fund filed a Form 8-K on November 13, 2026, to incorporate by reference its Investment Strategy Quarterly Report for the quarter ended September 30, 2026. The report outlines the Fund's investment philosophy and provides an update on the current economic and credit environment.
The Fund highlighted that interest rates rose sharply in the third quarter. Specifically, the 10-year Treasury yield climbed roughly 85 basis points, and the Federal Reserve raised short-term rates by 25 basis points to a range of 3.75% to 4.0%. The report notes a shift in market expectations from anticipating rate cuts earlier in the year to expecting additional tightening. The Fund characterizes this new reality as "higher for longer," noting that this environment benefits disciplined lenders with more investment income but poses challenges for capital structures built around an imminent decline in borrowing costs.
Regarding credit conditions, the Fund stated that the economy remains stronger than headlines suggest, supported by elevated corporate profitability and stable earnings expectations. However, the report notes that stress is building and dispersion among managers is likely to widen. It points out that traditional defaults remain near 2%, non-accruals are below 2%, and trailing realized losses are around 0.5%, which is below the long-term average. The Fund emphasizes that the ability to identify credit issues early, mark investments realistically, and manage through restructuring is becoming a key differentiator for managers.
The Fund's portfolio metrics as of September 30, 2026, include a Loan to Value of 39%, Net Leverage of 4.7X, Interest Coverage of 2.3X, and an Average Spread of 5.4%. The portfolio is composed of 98.3% First Lien Senior Secured debt and 99.8% Floating Rate Investments. The Fund also highlighted a Featured Investment in Project Fractal, a manufacturer of mission-critical components for defense applications.
