Private credit deserves scrutiny, but the scrutiny has to be precise. Much of the current debate is driven by US market stress, especially in semi-liquid vehicles that offer periodic redemptions while holding loans that are not naturally liquid.
For investors in Europe and Asia, the more useful conclusion is this: do not import the US narrative at face value, but do import the discipline. Allocators should ask harder questions about sourcing, underwriting, covenant enforcement, liquidity mechanics, fund leverage, portfolio concentration, and track-record quality.
The IMF estimated private credit assets and undeployed commitments at approximately USD 2.1 trillion globally in 2023. BlackRock has projected that the market could reach $3.5tn by 2028, implying continued mid-teen annual growth. As of June 2023, the private credit fund focus was concentrated in North America at approximately USD 1.1 trillion, followed by Europe at USD 460 billion and Asia at USD 114 billion. The regional differences matter, but they do not remove the need for forensic due diligence.
By Johanna Kruger and Radek Jezbera | Kilde
Private credit is multitudinous
Private credit is too varied for category-level conclusions to be useful.
An allocator should not ask, “Is private credit attractive?” The better question is: “Which private credit strategy, in which region, with what collateral, what covenants, what liquidity terms, what leverage, and what evidence of underwriting discipline?”
The US market is useful because it shows what can happen when an illiquid asset class is placed inside semi-liquid structures and then sold to investors who may expect more liquidity than the underlying loans can support. Europe and Asia are structurally different markets, but the same questions apply. The point is not to dismiss private credit. The point is to make the underwriting questions match the risks.
The US Market Is Not The Global Market
The IMF’s April 2024 Global Financial Stability Report shows that the market remains concentrated. North America dominates private credit by fund focus, with Europe materially smaller and Asia smaller still. The IMF also notes that, as of June 2023, private credit managers located in the United States managed USD 1.6 trillion in deployed and committed assets, growing at an average annual rate of 20% over the prior five years. Europe grew at 17% annually over the same period, while Asia grew at 20% annually but represented only about 0.2% of credit to nonfinancial corporations.
That matters because the most visible stress has been concentrated in US wealth-market vehicles, particularly non-traded BDCs and similar semi-liquid structures. The IMF estimated that closed-end funds accounted for approximately 81% of the private credit market, while BDCs accounted for about 14%. Closed-end funds and semi-liquid wealth vehicles create different liquidity risks.
The Warning From Semi-Liquid Funds Is Structural
Recent US redemption data show the liquidity issue clearly. In the first quarter of 2026, Morgan Stanley’s North Haven Private Income Fund received redemption requests equal to about 10.9% of assets and applied its 5% quarterly limit. BlackRock’s HPS Corporate Lending Fund received repurchase requests for approximately 9.3% of shares and also applied a 5% limit. In the second quarter, BlackRock HPS redemption requests rose to 13.3%, while Ares Strategic Income Fund received requests equal to 14.4% of net asset value and applied a 5% cap. Blackstone’s BCRED also faced elevated redemption requests, reported at 7.9% in the first quarter and 10% in the second quarter.
These figures do not prove that private credit as a whole is broken. They do show that quarterly liquidity windows are only credible if the underlying portfolio can support them. If the assets are multi-year, privately negotiated loans, the structure must be explicit about what happens when investors want liquidity at the same time.
Private Credit Has Real Strengths And Real Vulnerabilities
Private credit is often funded by long-term capital and can involve less maturity transformation than banking. Commentary citing recent research has argued that many private credit funds are equity-heavy, with roughly 65% to 80% of assets funded by equity rather than debt. That supports the argument that many funds are structurally different from banks.
But the IMF also identifies vulnerabilities: fragile borrowers, semi-liquid investment vehicles, multiple layers of leverage, stale or subjective valuations, and opaque interconnections among funds, borrowers, banks, insurers, pension funds, and private equity sponsors. Fitch-related reporting also showed the default rate in its portfolio of US private-credit assets reaching 9.2% in 2025, up from 8.1% in 2024.
The balanced conclusion is that private credit is not automatically fragile, but it is not automatically resilient either. The structure, borrower quality, collateral, covenants, and liquidity terms determine the risk.
Strategy Selection Requires More Than A Label
Private credit includes senior direct lending, asset-backed lending, real estate debt, infrastructure debt, mezzanine, distressed, and special situations strategies. These strategies do not have the same risk engine.
A senior secured loan book backed by short-duration receivables is not the same as a portfolio of sponsor-backed software loans. A non-sponsored borrower underwritten on cash-flow resilience is not the same as a highly levered buyout borrower. A closed-end institutional fund is not the same as a semi-liquid retail vehicle.
Allocators should therefore ask:
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What exactly is the strategy: senior secured, asset-backed, sponsored direct lending, non-sponsored lending, distressed, mezzanine, or something else?
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Who are the borrowers, and how concentrated are the top exposures?
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How much of the return is generated by recurring portfolio income versus one-off gains or outlier transactions?
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What proportion of the book has been amended, restructured, placed on non-accrual, or marked down?
The Most Important Due Diligence Questions
On sourcing:
- Which deals did the manager see exclusively, and which were broadly shopped?
- Why do borrowers come to this manager rather than to a bank, sponsor, or competing private credit platform?
- What has the manager declined in the past 12 months, and why?
On underwriting:
- What are the non-negotiable kill criteria?
- How are borrower cash flows stress-tested?
- Are covenants enforced, or repeatedly amended when borrowers breach them?
- What is the track record of covenant breaches, amendments, defaults, and recoveries?
On structure and liquidity:
- Are redemption windows backed by assets with appropriate duration?
- Are gates, queues, and suspension rights contractually defined?
- How is fund-level leverage used?
- Are distributions funded by portfolio cash flow, borrowing, asset sales, or NAV facilities?
- If investors follow one dollar from commitment to underlying exposure, how many layers does it pass through and what is the cost at each stage?
On team and track record:
- Did the current team generate the track record being marketed?
- Has the strategy drifted from its mandate?
- Are losses, exceptions, or restructured positions excluded from the headline performance record?
- Does the track record span a real credit cycle, or only a benign period?
Conclusion
Private credit can belong in allocator portfolios, but only when investors understand what they own. The US market is sending a useful warning about liquidity mismatch, retail distribution, valuation opacity, and the danger of generic marketing language. Europe and Asia are different markets, but they are not exempt from these questions.
The better private credit conversation is not about whether the asset class is good or bad. It is about whether a specific manager can explain the strategy, the borrowers, the collateral, the covenants, the liquidity mechanics, the use of leverage, the downside cases, and the deals they chose not to do.
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Sources
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IMF, Global Financial Stability Report, April 2024, Chapter 2, “The Rise and Risks of Private Credit”: https://www.imf.org/-/media/files/publications/gfsr/2024/april/english/ch2.pdf
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IMF, Global Financial Stability Report landing page, April 2024: https://www.imf.org/en/publications/gfsr/issues/2024/04/16/global-financial-stability-report-april-2024
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MarketWatch, “Private credit not only won’t spark a financial crisis – it may be more stable than your bank”: https://www.marketwatch.com/story/private-credit-is-actually-built-to-survive-the-ghosts-of-the-great-financial-crisis-6eaa35d6
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Financial Times, “Private credit won’t spark the next financial crisis”: https://www.ft.com/content/5e8c7a7e-d9be-43ce-be0d-cc92c4304fb1
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WSJ, “Morgan Stanley Caps Private Credit Fund Redemptions; Stock Falls”: https://www.wsj.com/livecoverage/stock-market-today-dow-sp-500-nasdaq-03-12-2026/card/morgan-stanley-private-credit-fund-hit-with-redemption-requests-IS8PSZh497HC5aF4CkGN
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Barron’s, “BlackRock Stock Tumbles as Flagship Private Credit Firm Limits Redemptions”: https://www.barrons.com/articles/blackrock-stock-private-credit-redemptions-34e6c94d
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WSJ, “BlackRock Private-Credit Fund Faces 13% Redemption Requests”: https://www.wsj.com/finance/investing/blackrock-private-credit-fund-faces-13-redemption-requests-5cba8e89
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FT, “Ares Management’s flagship private credit fund hit by 14% withdrawal requests”: https://www.ft.com/content/c7f1d22f-7ed9-4d7c-bb83-68423ea5fbf2
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Barron’s, “Ares Caps Private-Credit Fund Redemptions Again as 14% Seek Exits”: https://www.barrons.com/articles/ares-private-credit-fund-redemptions-investors-exit-38b1e87b
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MarketWatch, “Blackstone says withdrawal limits are a ‘feature and not a flaw'”: https://www.marketwatch.com/story/blackstone-says-withdrawal-limits-are-a-feature-and-not-a-flaw-designed-to-protect-investors-from-themselves-ec6f0e39
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WSJ, “Secondary Buyers Eye Private-Credit Assets as Redemptions Mount”: https://www.wsj.com/articles/secondary-buyers-eye-private-credit-assets-as-redemptions-mount-73566238