Leading private credit firms on Wall Street, including Blue Owl, Apollo Global Management, and BlackRock, are in choppy seas as share prices and private credit loans take a hit.
Private credit has been one of the fastest-growing segments of the global financial system over the past 15 years, expanding nearly tenfold to reach an estimated $2 trillion in assets under management (AUM) today, according to Moody’s Ratings.
But recent scandals in the US, regulatory pushback in the UK, and fears related to AI have some observers asking if 2026 might bring retrenchment in private credit marketplaces.
For investors, lack of transparency remains a continuous concern. In late January, executives at PC borrower First Brands Group were charged with “multi-billion dollar fraud” as federal prosecutors in Manhattan alleged they “deliberately concealed massive amounts of debt” from lenders. A number of blue-chip nonbank lenders had exposure to the middle-market auto parts supplier, including BlackRock and Jefferies.
Among regulators, the rapid growth of private capital markets, including private credit, raises questions about systemic risk. In early January, the UK’s Financial Services Regulation Committee of the House of Lords released a report concluding that “there are insufficient data to conclude whether private markets are systemic,” because there are still too many “unknown unknowns.” But, it added, “The Bank of England is right to shine a light on the growth of private markets and their interconnectedness with the banking system.”
On Wall Street, leading private credit firms are encountering choppy seas. The share price of Blue Owl, the largest of the group, has been sliced in half over the past year, including a 10% plunge on February 3 and a year-to-date decline of over 40%. Other large players including Apollo Global Management and BackRock have written down some large private credit loans.
A key concern is software companies, an industry segment that accounts for a whopping 20% of private-credit loans. The sector could face a major disruption due to its heavy bets on AI, industry analysts warned early last month, possibly leading to significant private debt losses.
Opacity Concerns Persist
“There is a lot of guesswork on private credit markets, because there is a lack of transparency and good quality data,” notes David Ramos Muñoz, associate professor of Commercial Law, Universidad Carlos III de Madrid. “This should be the top priority in order to have a proper diagnosis” with regard to risk, looking ahead.
While private credit per se may not pose a systemic risk, “the fact that the same private credit funds also form partnerships with banks, thereby blurring the boundary between bank and non-bank markets, may create macro-level systemic risk issues,” says Narine Lalafaryan, assistant professor of corporate law at the University of Cambridge. Such partnerships have, however, “alerted market participants to be more cautious.”
Central banks, including the Bank of England, are right to monitor private credit closely, argues Ludovic Phalippou, professor of Financial Economics at the University of Oxford. He has publicly called for more investor protections since investors often invest in private equity and private credit funds without knowing what and how they are being charged or the value of the underlying assets that borrowers are using as collateral.
But worrying about systemic risks might be going too far.
“Private credit is not banking,” Phalippou points out. “These funds do not take deposits, they do not promise daily liquidity, and they do not sit at the core of the payment system. That means the classic ‘run’ dynamics are unlikely. The main risk is not a sudden financial panic, but slower-moving credit losses that show up through insurers, pension funds, and the real economy.”
Phalippou anticipates more regulation eventually, but not bank-style regulation. The most likely mid-term changes are tighter disclosure rules, better data collection, stronger valuation governance, and stricter oversight of how private credit is sold to retail investors and held by insurers.
“Turning private credit funds into banks would be a mistake. Regulating the perimeter and the weak links in the system is the right approach,” he recommends.
European Growth Takes Off
Thus far, private credit activity has been concentrated in the US; more than 70% of global AUM to date are North American, BlackRock notes in a recent report. But the gap between the US and the rest of the world may be narrowing.
Europe captured nearly half of global private credit funds raised in the first half of 2025, according to a recent Moody’s Research report, and “Europe’s growth rate has the potential to outpace that of the US, with European assets reaching $800 billion-$900 billion by 2028.” Elsewhere, Moody’s Ratings projects overall global private credit AUM approaching $4 trillion by 2030, essentially doubling.
“The trajectory of private credit is unmistakably upward in the UK and Europe,” says Michael Moore, chief executive of the British Private Equity and Venture Capital Association (BVCA). Citing the Financial Services Regulation Committee’s private markets report, he notes that private credit loan issuance grew 285% in the UK and 130% in the EU between August 2022 and April 2024.
That’s not necessarily a bad thing, he argues.
“What often gets overlooked is the patient, predictable, and flexible nature of this capital,” Moore says. “Private credit providers are structured to take a long-term view, offering certainty and bespoke solutions that align with a company’s growth trajectory.”
The EU’s historic lack of nonbank financial institutions (NBFIs) isn’t necessarily a good thing, either, according to Muñoz, “as it reflects the lack of funding diversification.” A more prominent role for NBFIs in Europe and other parts of the world would increase funding diversification and improve funding for certain activities, although “the price should not be increased opacity and fragility.”
Still, there are reasons why private credit growth in Europe and elsewhere could stall. Private loan defaults could rise last year, as Kroll Bond Rating Agency warned recently, particularly among middle-market corporate borrowers.
“Several things could slow or reverse the growth,” Phalippou observes. A sharp economic downturn with lower-than-expected recoveries could force a painful repricing. A high-profile failure or scandal could trigger political and regulatory backlash. “And if insurers face capital pressure from private-credit losses, they may be forced to pull back quickly. Private credit will not disappear, but the idea that it can only grow and never disappoint investors is clearly wrong,” he cautions.
“It is a changing landscape,” Phalippou told the UK’s House of Lord’s Financial Regulation Select Committee last July. “Thames Water used to go to British banks [for funding]; now it can go to a Canadian pension fund for a loan.”
Even speaking about a single global private credit market can sometimes be difficult.
“Jurisdictions greatly differ,” says Muñoz. “In the US, private funds operate regularly in different segments, including loan origination, while in Europe they invest in credit, but their role in origination seems more limited.”
Expanding The CFO Toolkit
Looking ahead, CFOs, too, may want to keep an eye on private credit in 2026, in part for the opportunities it offers.
“Corporate CFOs will need to understand private credit as a core component of the modern financing toolkit,” the BVCA’s Moore recommends. While it will not always be suitable for everyone, “for the right businesses, it offers customized structures and a genuine complement to bank financing, especially for SMEs [small- to medium-sized enterprises].”
But finance officers will need to keep the wider risks in mind as well.
Private credit “remains an important asset class that should be monitored and studied carefully” by CFOs, says Cambridge University’s Lalafaryan. “In particular, special attention should be paid to private credit strategies that focus on distressed lending and capital solutions, as these are riskier and more innovative than safer, direct-lending private credit strategies.”
The global private credit market is far larger, more interconnected, and more retail-facing than it was 15 years ago, notes Phalippou. The concern is not whether or not managers remember the mistakes of the last financial crisis, “but whether the system as a whole has changed in ways that create new vulnerabilities, especially through leverage, valuation practices, and links to regulated institutions.”
