The global private credit market has expanded significantly, with assets under management (AUM) now estimated at $2.5 trillion. This figure, provided by the Bank for International Settlements (BIS), indicates substantial growth from less than $200 billion before the 2008 financial crisis and $1.5 trillion during the Covid pandemic. The BIS also projects AUM could reach $4.5 trillion by 2030.
Much of this growth is attributed to post-2008 crisis regulations that encouraged institutional investors, such as life assurers and pension funds, to seek higher-yielding assets. Unlike publicly traded bonds, the majority of private credit is floating-rate, meaning payments increase with interest rates.
However, concerns are emerging regarding default rates and liquidity. Ratings agency Fitch reported that default rates for private credit borrowers reached 6.3% in the third quarter of 2026. This contrasts with estimates from investment bank Houlihan Lokey, which suggests a figure of less than 1% of outstanding principal, or 2.5% by borrower count, indicating a skew towards smaller distressed borrowers. Pimco, another investor, suggests a default rate of 19% based on analysis of $500 billion of assets in retail BDCs.
Business development companies (BDCs), which constitute under 15% of the private credit market, have experienced liquidity challenges. Funds like Blackstone Private Credit Fund (BCRED) and BlackRock's HPS Corporate Lending Fund (HLEND) have seen redemption requests of approximately 10% and low-teens percentages, respectively, in the last two quarters. Blue Owl Technology Income (OTIC) reported requests exceeding 38% of shares.