Key takeaways
- The private credit market continues to grow, supported by strong demand, while recent developments reflect a normal phase in the credit cycle.
- Access to private credit is gradually expanding to retail investors, but institutional investors remain dominant.
- As the private credit market matures, the focus is shifting toward more diversification, disciplined underwriting, transparency and investor education.
What is private credit and why has the private credit market grown so significantly?
Private credit has experienced significant growth over the past few years and is increasingly at the centre of discussions across the financial industry. It refers to lending outside of public markets to companies or projects, through privately negotiated agreements. As part of the broader private assets universe, alongside private equity, it plays an increasing role in financing the real economy, notably by supporting business expansion, infrastructure development and innovation.
The private credit asset class expanded rapidly after the 2008 financial crisis following stricter lending regulations for banks. Non-bank financial institutions (NBFIs), such as alternative asset managers or private equity firms, emerged to fill the financing gap. Low interest rates over an extended period also supported growth, driving demand from investors seeking diversification and enhanced returns. Over time, private credit has become a sizeable asset class and the market is expected to exceed USD2 trillion in global assets under management (AUM) in 2026, according to Moody’s.
While recent headlines have focused on risks, liquidity, and redemptions, discussions at BNP Paribas’ 2026 European Bank Executive Committee (EBEC) forum, which gathered senior representatives from across the world of finance, pointed to a solid medium- to long-term outlook.
❝ The 2026 EBEC forum brought together senior industry representatives from across the financial ecosystem – including banks, fintechs, asset and wealth managers, financial sponsors, insurers, and official institutions – to discuss the key trends shaping the future of financial services, such as the expansion of private credit. ❞
Private credit market concerns: underwriting, liquidity and redemptions
As the private credit market expands, concerns have emerged around underwriting standards and portfolio exposure to specific sectors, notably software and technology companies. According to BNP Paribas Equity Research, across various market participants, software loan-to-value (LTV) is typically below 40%, with direct lenders largely exposed to first lien debt. It appears that the main risk in the market is not about near-term profitability, but instead the long-term effects of AI on software, effectively resulting in terminal value uncertainty. Combined with concerns around the illiquid nature of the underlying assets, this has contributed to an increase in redemption requests at some private credit funds, prompting some fund managers to tighten existing redemption caps.
However, discussions at EBEC emphasised that private credit has a role in financing the real economy with further growth potential. While the private credit market is rapidly expanding, it remains relatively small when set against the broader financial system. To illustrate, BNP Paribas Equity Research analysts note that it is roughly the same size as either leveraged loans or high-yield (HY) bonds in the US, but it is still a small fraction – less than 5% of the entire US corporate credit market. Experts cautioned against overinterpreting the latest concerns, noting that as lending activity grows, competition increases, spreads narrow, and underwriting standards diverge among market participants.
Currently, reported risks in private credit portfolios remain contained to specific sectors and overall default levels remain relatively low, even if credit quality may cool from recent very healthy levels. While some funds have experienced markdowns linked to concentrated exposure, for instance to the software and AI sector, recent redemption activity needs to be contextualised, according to panellists.
Panellists pointed to signs that the private credit market is entering a more mature phase, with periods of rapid growth likely to be followed by greater diversification and more selective lending, reinforcing the importance of discipline in origination, underwriting and portfolio construction to deliver attractive risk-adjusted returns.
According to panellists, current conditions signal a natural phase of adjustment and are seen as part of a credit cycle rather than a systemic issue, with the longer-term outlook for the private credit market remaining intact.
❝ Private credit is not only about generating returns, but about building diversified portfolios and financing the real economy – from infrastructure to new investment opportunities. As the market evolves, what matters most is selectivity, diversification and disciplined underwriting standards. ❞
Is private credit suitable for retail investors? Transparency and education in the private credit market are key
One trend in the private credit asset class is increased access to a broader investor base, particularly among retail investors, primarily high‑net‑worth individuals. Despite growing interest, private credit investment continues to be largely driven by institutional investors, which still account for more than 95% of the market, according to BNP Paribas Equity Research.
While institutional investors understand this asset class well, panellists stressed that appropriate guardrails are essential for retail investors.
❝ The retailisation of private assets is a major structural change for the asset management industry. It brings opportunities in terms of diversification and returns, but also a clear responsibility to ensure investors fully understand liquidity, valuation and the long‑term nature of these investments. ❞
Enhancing transparency and investor education around risks including liquidity constraints, asset allocation considerations within a broader investment portfolio, and long‑term investment horizons was seen as critical. In this context, retail investors, and in particular high‑net‑worth individuals, are expected to some degree to play an increasingly important role in the development of the private credit asset class.
Speakers also underlined that products offered to retail and institutional investors are based on the same underlying assets and credit processes. Thus, the difference lies in how these products are marketed.
❝ As the private credit market continues to expand, the focus is increasingly shifting to education, suitability, transparency, and stronger coordination between asset managers, distributors and financing partners, all this under adequate supervision by regulators. ❞
Overall, industry experts believe the private credit asset class will continue to grow, with institutional investors remaining the primary drivers, alongside a gradual increase in retail participation.
How the private credit market differs across regions
Private credit markets vary significantly by region. The United States remains the most developed market, accounting for the majority of global private credit. Assets under management reached approximately USD1.34 trillion in the US compared with almost USD2 trillion worldwide as of mid-2024, according to research from the US Federal Reserve.
US regulators are increasingly focused on the private credit market as access broadens beyond institutional investors into the retail sphere. The Securities and Exchange Commission (SEC) has emphasised the need for enhanced investor protection, transparency and risk disclosures. At the same time, proposed regulatory changes, such as a rule to democratise 401(k) retirement plan investments in alternative assets, including private credit, illustrate a broader effort to expand access.
Meanwhile, Europe’s private credit market is smaller than the US market, but continues to develop, with assets under management estimated at around USD500 billion in 2024 according to Preqin. It presents a significant opportunity to finance non-listed companies, small and medium-sized businesses (SMEs), as well as real estate, infrastructure projects, and innovation, while contributing to long‑term economic growth and competitiveness. In this context, private credit is increasingly seen as a source of financing for the European economy.
Several speakers during EBEC referenced the need to unlock private capital to support growth in Europe. They also pointed to evolving regulatory frameworks designed to facilitate this, such as the updated European long‑term investment fund (ELTIF 2.0) which enhances flexibility and investor appeal while also providing new avenues for retail investors with additional protection.
In Asia Pacific, private credit markets are still in an earlier phase of development, with assets under management expected to grow from around USD59 billion in 2024 to USD92 billion by 2027, according to the Alternative Investment Management Association (AIMA). Experts are observing increasing activity, growing interest from global asset managers, and robust investor demand. Regulatory frameworks are also evolving, with new long‑term investment fund structures, such as the Monetary Authority of Singapore’s Long-Term Investment Fund (LIF), emerging across the region.
