In a recent paper, my co-authors and I examined the balance sheets of private credit funds. To this end, we used one of the most comprehensive datasets available, covering more than 1,200 funds and nearly 9,000 underlying loans, representing roughly two-thirds of the US market by assets.
Private credit has become a major source of financial anxiety, reflecting growing concerns about rising defaults, tighter liquidity, and the entry of retail investors into a market designed for institutions.
But the debate is focusing on the wrong issue. The question is not whether private credit is risky, but where that risk now lies, and whether it is visible. That distinction is particularly important for the US Federal Reserve, which could soon be led by President Donald Trump’s nominee, Kevin Warsh.
