Private credit has avoided a “Lehman moment,” but pressures are growing among liquidity, power, and transparency—raising doubts about how long the asset class can withstand its apparent fracturing.
Some investors have had enough. Consider the increase in bailout requests from firms such as Morgan Stanley, Apollo Global Management, BlackRock and Blue Owl Capital. Each company closed a 5% withdrawal from each fund, and saw share prices drop. At first glance, these outflows indicate that the endgame may be near.
Larry Fink, BlackRock’s chief executive, tried to allay fears on last week’s earnings call, stressing that institutional demand is accelerating. Meanwhile, financial regulators are raising red flags. Financial Stability Board Chairman Andrew Bailey warned in an April letter to the G20 that political tensions, such as the ongoing conflict in the Middle East, could lower asset prices and further strain sovereign debt funds.
The dichotomy has financial experts scratching their heads, wondering what to do with an important part of the $15 billion private equity market ecosystem. If data from UK-based data firm Preqin is correct, private debt could reach $4.5 trillion in assets under management by the end of 2030, more than double from $2.1 trillion by the end of 2024. Even with strong fundamentals, rising private debt concerns, growth risks and macroeconomic pressures are testing its resilience.
Liquidity Mismatch Problem
“This is not a one-firm issue,” Former Nasdaq Vice Chairman David Weild told Global Finance. “In every field.”
Fink may be right; private loans offer compelling risk-adjusted returns, Weild, now a consultant at private credit platform KoreInside, said. “However, if the claim is that you can deliver that return within a vehicle that promises quarterly or monthly income to retail investors, one will inevitably find that in times of market stress, the need to raise money will outweigh the short term need to raise money.”
Recent turmoil in sovereign debt has raised questions about whether 2026 could bring widespread layoffs. The industry is facing increasing scrutiny over fraud risks, regulatory pressure, and the impact of AI-driven disruption. Transparency concerns concern investor credibility, highlighted by auto parts supplier First Brands Group, which has filed for bankruptcy protection and is accused of hiding billions of dollars in debt from lenders, including exposure to secret debt accounts held by BlackRock.
Software lending has become more concentrated, given the large portion of private loan portfolios. AI-driven disruption now raises concerns about future credit losses.
“The combination of AI-driven disruption in enterprise software valuations, tighter lending standards, and pressure to bail out the very BDC vehicles that typically provide leverage creates a compounding problem,” Weild said. “Some private equity funds are already turning away from software companies, given the impact of AI on that sector.”
What Needs to Change
Private equity giants need to rethink “real structural challenges,” such as how capital is raised, how vehicles are structured, and what level of education advisors need going forward, said Prath Reddy, President of Percent Securities. Lack of accessible data, limited funds, and insufficient options for corresponding exposure also give him pause.
“We are really in a state of depression now,” said Reddy. “It’s going [these issues] not being adjusted leaves a huge amount of money on the table from the wealth management channels.”
Private debt may be under the microscope, but some private players continue to make money. Ares Management raised $9.8 billion for a leveraged debt strategy, Adams Street Partners closed its $7.5 billion Private Credit III fund, and The Carlyle Group raised $1.5 billion in seed funding for a new asset-backed financing vehicle.
“For private debt to continue to perform at this level, liquidity structures, acquisition rates, and repayment periods must all remain consistent as exits take longer and financing becomes more selective,” said Jun Li, leader of EY’s Global and Americas Wealth & Asset Management. Depression occurs when those ideals collapse together.
“A real stress situation can involve risk refinancing collisions with slow outflows and changing liquidity expectations, especially if funds are locked up for longer than expected and operating models are not built to absorb that pressure,” Li added.
Banks Pay the Price Relationship
Big banks—both competitors and partners to non-bank lenders—are trying to show peace.
JPMorgan Chase CEO Jamie Dimon, for example, downplayed concerns about the sovereign debt sector in an April 14, 2026, earnings call. That’s a stark contrast to what he did last year, when Dimon referred to the bankruptcy proceedings of First Brands and TriColor—two companies that rely on private debt—as “cockroaches.”
JPMorgan Chase is now strengthening certain relationships with private debt funds to limit exposure during volatility. Goldman Sachs and Barclays take a similar stance on risk management.
“On the other hand, fundamentals still look supportive as institutional capital flows in as banks retreat,” Li said. On the other hand, pressures are building around liquidity, power, and refinancing, which raises structural questions.
As Li put it: “This does not look like the end game, but it looks like a decisive moment.”
What’s Next
From here, Li predicts that private credit will split into managers who can operate with long cycles, tight liquidity, and high scrutiny, and those who can’t.
“Some strategies may be difficult, but the broader market is still evolving rather than regressing,” Li said. “The outcome will depend on one shock and more on how firms adapt to a more difficult environment.”
Some viewers are much better. Attorney Derek Ladgenski, private equity partner at Katten Muchin Rosenman, argued that savvy market participants will ultimately face the industry’s challenges.
“Avengers is closer to the end than private credit,” Ladgenski said. “The tombstone of private credit has been written many times before.”
Ladgenski said that while cyclical pressures exist in all asset classes, the deepest challenge for private debt is liquidity mismatch—the result, in part, of significant investor inflows chasing their strong historical record and forward-looking returns.
Still, any “stickiness” will ultimately strengthen the sector, he added. “And the current buzz and headlines about any death knells will soon be forgotten.”
Editor’s Note: A previous version of this story had the wrong Preqin measure again since it is fixed.
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