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At this scale, success is no longer defined only by origination discipline, structuring expertise and sponsor relationships. Platforms must be able to identify potential stress early, intervene effectively and preserve enterprise value across large and complex portfolios.
The pressure is structural as much as cyclical. Portfolios that used to be managed via close lender-sponsor relationships now often span hundreds of businesses across direct lending, opportunistic credit and special-situations strategies. At the same time, macro stress is becoming more frequent. In 2024, U.S. corporate bankruptcy filings reached their highest annual total since 2010,2 while liability management exercises (LMEs) represented 69% of dual-track defaults in the same year.3
Amend-and-extend transactions, distressed exchanges, out-of-court restructurings and debt-for-equity outcomes are no longer exceptional events. They’re part of the operating landscape that every scaled credit manager must now be built to navigate.
Private equity (PE) firms have spent decades institutionalizing operating capabilities to drive transformation, accelerate growth and maximize exit value. What began as networks of former CEOs serving as part-time senior advisors has evolved into dedicated value creation platforms that combine sector expertise, functional excellence and rigorous execution.
Private credit firms, by contrast, have historically prioritized underwriting discipline, downside protection and financial restructuring. Those capabilities remain essential but are no longer sufficient. As lenders become more active stewards of portfolio performance, more frequent participants in complex creditor negotiations and more often owners after restructurings, the role is expanding beyond protecting downside to preserving and enhancing enterprise value. Success increasingly depends on combining financial discipline with the operational capability to influence performance long before a business reaches distress.
For credit managers, the question is no longer only, “How do we protect our position?” but becoming, “How do we improve the business and enterprise value when the underwriting case changes?”
This strategic gap is coming into focus, with several leading managers building operating capability across credit, hybrid and opportunistic models. They’re embedding full-time execution support rather than relying on external workout teams or borrowed PE resources.
The implication for the rest of the market is clear. Workout coverage is becoming the baseline, with the differentiator being whether operating capability is integrated early enough to change outcomes.
Each one brings strengths and considerations.
Pure restructuring professionals may be too focused on capital structure. Pure operators may underestimate creditor dynamics. Pure consultants may lack the authority required for execution in distress situations. The most sought-after candidates sit at the intersection of these archetypes: restructuring-literate operators, value creation leaders with creditor fluency, and data-driven executives who can translate intelligence into action.
One of the greatest sources of these hybrid profiles is the turnaround CFO. Having led businesses through financial and operational stress, these executives combine balance sheet expertise with hands-on operational leadership, managing liquidity, driving performance improvement and working simultaneously across lenders, sponsors and boards.
Many of the strongest candidates began their careers at firms such as AlixPartners and Alvarez & Marsal before moving into interim and transformation CFO roles. Firms that look beyond traditional restructuring advisors and asset management operating teams to these hybrid leaders will gain access to differentiating talent.
There won’t be one operating model for value creation in private credit. The right answer depends on strategy, scale, sector concentration, control rights and portfolio complexity. Firms are experimenting with different organizational models, embedding operating partners within investment teams, establishing dedicated portfolio value-creation functions or integrating them with restructuring and workout groups.
The mandate, however, is consistent across models and the hiring implication is direct. Credit funds want leaders who can diagnose performance drift, influence management without formal control, reset operating plans, navigate creditor and sponsor dynamics and step into ownership situations with urgency. The role is shifting from protecting the loan to preserving and enhancing enterprise value.
This shift is changing the conversation with limited partners (LPs) and investment committees. The questions are becoming more operational and evidence-based, including:
The funds that can answer those questions will have an advantage. They will intervene earlier, preserve more options for recovery and enter restructurings with a clearer path to value realization. Those that wait until default will need the same talent, but they’ll be hiring under worse conditions: less time, less leverage, less information and fewer high-quality candidates readily available.
Private credit's next competitive advantage isn’t better workout capability. It’s institutional operating capability integrated earlier in the investment lifecycle, closer to portfolio companies and more consistently across the broader portfolio.
This proficiency must be established before defaults emerge, not assembled in response. As the asset class continues to scale faster than the operating models supporting it, firms that close this capability gap will build a compounding advantage through earlier intervention, stronger recoveries, better post-reorganization outcomes and a more compelling story for LPs on how they preserve and create enterprise value through periods of stress.
The goal isn’t to turn lenders into PE firms. It’s to adopt the ownership disciplines that matter most when capital is at risk and the business needs to change, including management assessment, a credible value creation plan, execution infrastructure and the urgency to act.
In a market where lenders are increasingly asked to influence, stabilize and sometimes own the businesses they finance, protecting recovery and improving enterprise value are no longer separate objectives. The best credit platforms have stopped treating them that way.
Heather Hammond co-leads the Private Capital Practice for Russell Reynolds Associates. She is based in New York.
Emily Taylor co-leads the Private Capital Practice for Russell Reynolds Associates. She is based in New York and London.
Noah Schwarz is head of Private Credit for Russell Reynolds Associates. He is based in New York.
Charles Watson is a member of Russell Reynolds Associates’ Financial Services practice. He is based in Stamford.
Courtney Byrne is a member of Russell Reynolds Associates’ Private Capital Commercial Strategy & Insights team. She is based in London.
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