{"id":493246,"date":"2026-02-27T08:01:15","date_gmt":"2026-02-27T08:01:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/493246\/"},"modified":"2026-02-27T08:01:15","modified_gmt":"2026-02-27T08:01:15","slug":"why-concerns-are-growing-over-the-private-credit-market","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/493246\/","title":{"rendered":"Why concerns are growing over the private credit market"},"content":{"rendered":"

Private credit \u2014 or borrowing money from investors or money managers, rather than banks \u2014 is an increasingly popular way<\/a> for companies to access capital and expand their business.<\/p>\n

That market has grown fivefold<\/a>\u00a0since the 2008 financial crisis, according to the Federal Reserve, and now sits somewhere near the $2 trillion mark globally. In the last couple weeks, though, the private credit market has gone sideways, and economists aren\u2019t exactly sure what to make of it.<\/p>\n

After the financial crisis, regulation forced big banks to tighten up their lending practices. Elisabeth de Fontenay, a finance law professor at Duke University, said that made it harder for some companies to get loans.<\/a><\/p>\n

\u201cThis has really created an opening for private credit funds to step in,\u201d she said.<\/p>\n

De Fontenay said private lending can be riskier<\/a> than bank loans or corporate bonds. But Laura Veldkamp, a finance professor at Columbia University, said that\u2019s part of their appeal.<\/p>\n

\u201cTypically, you’ll get a higher rate of return in private credit,\u201d she said.<\/p>\n

\u200aInvestors tend to have an appetite for that kind of risk.<\/p>\n

\u201cSo you might have an endowment fund, you might have a wealthy person trying to achieve more diversification,\u201d Veldkamp said.<\/p>\n

As for the companies receiving those loans, Gerald Cohen \u2014 finance professor and chief economist of the University of North Carolina at Chapel Hill\u2019s Kenan Institute of Private Enterprise \u2014 said a significant amount has been in the software industry.<\/a><\/p>\n

That shouldn\u2019t be a surprise, he said. Software firms are often startups, too small to sell bonds or meet requirements for bank loans. Cohen said the problem right now is that software companies are threatened by the development of artificial intelligence.<\/p>\n

\u201cIs AI just gonna be able to develop all our software?\u201d he asked. \u201cDo we need software companies anymore?\u201d<\/p>\n

Those fears caused share prices for private credit managers to drop in recent weeks. By itself, that\u2019s not a huge deal, Veldkamp said.<\/p>\n

\u201c(But) maybe this is the canary in the coal mine,\u201d she said.<\/p>\n

There could be ripple effects<\/a>, Veldkamp said. Big banks \u2014 those considered too big to fail \u2014 sometimes lend to the same private credit managers who make those riskier loans. And while a private credit collapse isn\u2019t imminent, she said there are still concerns<\/a>.<\/p>\n

\u201cThe concern is that this is just the beginning and that this is a more widespread phenomenon,\u201d Veldkamp said.<\/p>\n

But, she said, it\u2019s still too early to tell.<\/p>\n

Related Topics<\/p>\n","protected":false},"excerpt":{"rendered":"Private credit \u2014 or borrowing money from investors or money managers, rather than banks \u2014 is an increasingly…\n","protected":false},"author":2,"featured_media":493247,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[225959,225958,1532,28,101,11223,3201,89180],"class_list":{"0":"post-493246","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-225959","9":"tag-bank-loans","10":"tag-banks","11":"tag-business","12":"tag-economy","13":"tag-financial-crisis","14":"tag-private-equity","15":"tag-private-investment"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/493246","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=493246"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/493246\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/493247"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=493246"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=493246"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=493246"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}