Kroll and StepStone Launch Payment-in-Kind Indicators for Private Credit Benchmarks

Kroll and StepStone launched three PIK indicators covering more than 28,000 direct-lending instruments, 18,000 deals and 13,000 borrowers, with historical data back to 2012. The benchmarks show PIK represented 2.86% of interest income on globally originated loans over the previous 12 months as of Oct. 10, 2026, versus 6.67% for the global outstanding-loan cohort at the end of Q2 2026, indicating PIK use is moderating rather than accelerating.

Analysis

The useful signal is not a clean credit-cycle turn: the newer-originations and outstanding-loan measures have different populations and dates, so their gap cannot establish that PIK is falling across the market. It does, however, underscore why cash-pay and PIK yields should not be treated as equivalent. PIK can support reported income while increasing borrower leverage and postponing visible liquidity stress; greater visibility may therefore pressure marks where portfolio returns rely heavily on accrued interest, even before payment defaults rise.

For StepStone, the strategic upside is potential differentiation of its data and advisory offering, but this announcement alone does not establish adoption, incremental revenue, or material earnings contribution. If these indicators become a common diligence tool, the second-order effect could be tighter scrutiny of private-credit managers and more dispersion between portfolios with cash-generative borrowers and those dependent on payment deferrals. Publicly traded BDCs and alternative managers could face sentiment spillovers, but the data release is not evidence that any specific portfolio is impaired.

Over the next 1–3 months, watch whether managers disclose comparable PIK exposure and whether the benchmark gets cited in investor reporting; over 6–18 months, broader adoption could improve comparability and reduce the informational advantage of opaque lenders. The contrarian point: more measurement can expose risk without indicating that risk is worsening. No directional STEP or sector trade is warranted on this announcement alone.

Key Decisions for Investors

• Keep STEP at neutral; treat benchmark adoption and monetization as a watch item, not an earnings catalyst until management provides evidence of client uptake or revenue contribution.
• At the next STEP results and investor commentary, check for measurable growth in data/advisory activity and any indication that the new benchmark is being commercialized. Weak uptake or no discernible contribution would undermine the strategic upside thesis.
• For private-credit exposure, distinguish cash-pay income from PIK and compare like-for-like loan cohorts, sectors, and borrower sizes. Do not interpret the reported cohort difference as a market-wide trend without matched-period data.
• Monitor manager disclosures and BDC reporting for rising PIK balances alongside weaker cash interest coverage or deteriorating credit marks; that combination, rather than this product launch, would be a stronger signal to reduce or hedge exposed credit risk.