Private credit warnings dismissed as industry continues to raise billions
Wall Street, Manhattan, New York.
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Investors’ appetite for private credit has not diminished even as warnings about loosening loan approval and risk assessment practices and increasing borrower stress have grown.
Problems at First Brands Group last September became a flashpoint for private credit critics after the heavily leveraged auto parts maker fell into trouble and highlighted how aggressive debt structures quietly formed during years of easy financing.
The incident raised fears that similar risks could be lurking in the market, prompting JPMorgan CEO Jamie Dimon to warn that private credit risks were “hiding in plain sight” and that “cockroaches” were likely to emerge when economic conditions worsened.
Bridgewater founder Ray Dalio Warned of increased stress Due to higher rates in the venture capital and private credit markets as leveraged private assets are squeezed as part of broader private market tensions.
Private loan investors reportedly More than 7 billion dollars were withdrawn In the final months of last year, capital continued to flow into private credit funds from other big Wall Street names such as Apollo, Ares and Blackstone.
Just last week, KKR announced that it had completed a $2.5 billion fundraising for the Asia Credit Opportunities Fund II. TPG, one of the industry’s largest players, closed more than $6 billion for its third flagship Credit Solutions fund in December, far exceeding its $4.5 billion target and doubling the size of its predecessor.
Neuberger Berman in November announces final closing of fifth flagship private debt fund It exceeded its original target at $7.3 billion, as demand from global institutional investors remained strong.
Granite Asia in December Temasek announced the first close of its first pan-Asian private credit strategy, which has raised over $350 million with support from Khazanah Nasional and the Indonesian Investment Authority, underlining strong investor demand in the region. Initial closing is when a fund accepts initial investor commitments and begins investing even as fundraising continues.
Why do investors keep coming back?
While Dimon raises the alarm on private credit, JPMorgan appears to have reassessed the market.
JPMorgan noted in its Alternative Investments Outlook 2026 that private credit demand continues to be supported by structural forces, including persistent financing needs among middle market companies, infrastructure developers and asset-backed borrowers, even as underwriting standards loosen in some segments of the market.
Private credit has grown into a multi-trillion-dollar market and has become the primary allocation of many institutional investors, according to Goldman Sachs. Pension funds, insurers and endowments, which once viewed the asset class as a niche alternative, now see it as a long-term fixture of their portfolios.
“Concerns about a potential bubble in private credit resurfaced in September 2025 when a handful of US borrowers defaulted on large loans, particularly in the auto sector,” the investment bank said.
“While comments from investors and other interested parties outside the U.S. domestic market are concerning, these defaults appear to be issuer-specific rather than systemic,” JPM said, adding that demand for returns continues to outpace supply, particularly for private equity transactions.
Compared to private loans, there is also a structural element involved. industry experts. While traditional banks have stopped lending due to regulatory restrictions, private loan funds have become the main providers of capital to middle market companies.
reforms Increasing capital requirements and stricter risk-weighting rules following the Global Financial Crisis in 2008 made it more costly for banks to keep riskier corporate loans on their books, encouraging many lenders to withdraw from certain areas of leveraged or specialized financing, opening a gap into which private lending companies have stepped.
This dynamic has reinforced the perception that private credit is no longer a niche strategy but a core component of the financial system.
Don’t ignore signs of strain
Even as fundraising remains strong, signs of tension are becoming harder to ignore.
Goldman Sachs has warned that higher interest rates are driving up borrowing costs and a growing number of companies are struggling to meet their private loan repayments.
Data provided by the bank showed that about 15 percent of borrowers were no longer generating enough cash to cover the full interest, and most others were operating with little margin for error.
While rate cuts could provide some relief, the investment bank said they would only modestly ease pressure rather than correct underlying weaknesses.
Morningstar also warned It’s about the deterioration of credit profiles among both high- and low-quality borrowers in 2026, as higher interest rates are reflected on balance sheets, especially compared to the ultra-low levels between 2010 and 2021.
We’re not seeing the kind of pressure or treaty erosion that people in the US are worried about
Concerns about leverage and borrower stress are not evenly distributed across markets; Industry executives point to stark differences between the US, Europe and Asia.
Ming Eng, managing director of Granite Asia, said private credit markets in Asia are much less saturated than in the United States or Europe. “We’re not seeing the kind of pressure or agreement erosion that people are worried about in the United States,” Eng said. “Asia is at a very different stage of development.”
He noted that the U.S. and European private credit markets have become crowded with intense competition leading to looser structures and higher leverage, but the Asian market remains relatively nascent. Most borrowers are founder-led companies or family businesses that still rely heavily on banks or equity financing, allowing private loans to grow.
“A lot of what we see in Asia is still pretty conservative,” Eng said. “There is less leverage, stronger covenants and usually a real business story behind the capital, no financial engineering.”
This difference is important at a time when concerns are growing about the quality of insurance in developed markets.
