The Rising Risk Of Private Credit

Private debt assets under management have more than quadrupled since 2015, driven primarily by institutional investors such as pension funds, foundations, university endowments and insurers, according to Pitchbook estimates.

Following tighter banking regulations after 2008, traditional lenders  became more cautious and private credit stepped into the space attracted by the high interest rates obtainable.

Private credit’s growing size and interconnectedness mean that negative developments within the market are more likely to have broader implications for the financial system, fuelling concerns about the sector’s significant exposure to certain verticals, specifically software, where the risk of AI disruption is high.