What is private credit
A loan outside banks and outside the public market.
Private credit is a loan arranged directly between a company and a non-bank lender, typically a fund. These loans are usually not actively traded afterward, which means the market does not have a clear daily price for them. The U.S. private credit market is already approaching $1.3 trillion and accounts for roughly 30% of debt issued by below-investment-grade companies. Globally, private credit now stands at around $3.5 trillion in assets under management.
Where is the problem
Not in the fact that the market is growing. In the fact that bad news shows up late.
Private credit is a highly opaque part of the market. Regulators openly warn about limited information on borrowers, the risk of outdated valuations, and the possibility of delaying the recognition of losses. The problem with private credit is therefore not just that it is large. The bigger issue is that problems inside it often do not show up immediately.
Some of these loans use what is called PIK. This is a structure where the company does not pay interest in cash on an ongoing basis. Instead, that interest is added to the total debt. Put simply, instead of the company actually sending money out, its debt just keeps growing. On the surface, this can make the situation look calmer than it really is.
That is dangerous because the problem can stay hidden for some time. The company has not formally failed yet, but its debt keeps rising and its condition keeps getting worse. When it finally becomes clear that it cannot keep up with repayments, the problem is often much bigger than it first appeared.
And the numbers are already showing it. In 2025, the number of companies that stopped meeting their payments was higher in private credit than in other risky parts of the corporate debt market. That includes leveraged loans, which are loans made to already heavily indebted companies, and high-yield bonds, which are corporate bonds that offer higher interest but also carry higher risk.
The reality in numbers
BlackRock had to limit withdrawals in its $26 billion HLEND fund after investors requested $1.2 billion back. Blackstone raised its withdrawal cap from 5% to 7% and, together with its employees, added more than $400 million of its own money to help absorb the pressure. Morgan Stanley kept a 5% withdrawal limit in its private credit fund. Blue Owl sold $1.4 billion of assets and, in one fund, stopped investor withdrawals permanently.
Even more importantly, banks are no longer calm about the sector. JPMorgan marked down certain loans linked to private credit players, especially those exposed to software companies, which reduced the amount of financing available to them. Deutsche Bank also said its private credit portfolio had grown to nearly €26 billion and that the sector is raising concerns over whether some of these loans were properly reviewed, as well as concerns about fraud or distorted information spreading through connected counterparties. The Fed had already warned earlier that banks’ lending into private credit does not yet appear to be a systemic problem, but it is growing quickly. And we should not forget that one of the Fed’s unofficial roles is not to tell the public too early when something is wrong.
How big of a problem is it
This is not a small issue at the edge of the market. It is a large segment that can already cause real damage.
Private credit is no longer a small side part of the financial world. The U.S. market is now roughly around $1.3 trillion, which is approximately where the subprime mortgage market stood before the 2008 crisis. Globally, this market is far larger.
That alone does not mean the same collapse must happen again. But it does mean something else, and possibly something just as uncomfortable. When a market becomes this large, while at the same time making it difficult to see where problems are already building, it does not take much pressure for stress and fear to spread quickly.
In 2008, the problem was visible in household mortgages. People stopped making payments, banks were left holding bad assets, and sooner or later the market repriced them hard. Today, the problem sits somewhere else. The money has mainly been lent to companies, outside the public market, outside normal market visibility, and often without it being obvious at first glance how healthy those companies really are.
And that is what makes it dangerous. In 2008, the problem was massive, but eventually it could be seen. In private credit, the problem can stay hidden for much longer. On the surface, everything can look calm, while underneath the pressure is already building. Then investors want their money back and suddenly discover that getting out is not as easy as they thought.
Put simply: 2008 was an explosion of a visible problem. Today’s private credit market could be a problem that looks calm right up until there is nowhere left to run.
Note: This text is for informational purposes only and does not constitute investment advice. Investing in financial markets involves risk, and it is important to do your own analysis before making any decision.