<p>Private credit — loans made by asset managers, insurance companies, and specialized funds rather than banks — has crossed $2 trillion in global assets under management, making it one of the fastest-growing segments in finance. The growth reflects structural changes in banking regulation, institutional investor demand for yield, and the service gap left by banks pulling back from mid-market lending after the 2008 financial crisis.</p>
<h2>What Private Credit Is and Why It Grew</h2>
<p>When a mid-size company (say, $50M-500M in revenue) wants to borrow $100M, banks have increasingly declined — post-2008 capital requirements make mid-market loans less profitable for regulated banks relative to their capital cost. Private credit funds stepped into the gap. They're not subject to bank capital requirements; they raise money from institutional investors (pension funds, endowments, insurance companies) and deploy it as loans, typically at higher interest rates than bank debt and with more flexible structures.</p>
<p>The 2022-2024 interest rate environment accelerated the trend: institutional investors who had been starved for yield saw private credit offering 10-13% returns on senior secured loans — attractive relative to alternatives.</p>
<h2>Systemic Questions</h2>
<p>At $2 trillion, private credit is now large enough to matter systemically. Regulators at the FSB (Financial Stability Board), Federal Reserve, and ECB have begun examining the sector's risk concentration, interconnections with regulated banks, and opacity. Unlike bank loans, private credit portfolios are not marked to market daily — which means stress may be less visible until it's acute.</p>
<p>The sector's first real stress test is approaching: a significant portion of private credit loans were extended at peak valuations (2020-2022) to leveraged buyout transactions that are now facing higher debt service costs. How the credit cycle turns will define the asset class's next decade.</p>