economy
March 11, 2026
Private credit could be the next crisis on Wall Street. How worried should investors be?
Goldman Sachs said roughly 80% of the direct lending market is held in vehicles that typically don't allow investors to redeem capital on demand.
TL;DR
- Retail investors are pulling money from private credit funds, increasing redemption requests.
- JPMorgan has reduced the value of loans pledged as collateral by some private credit clients.
- Loans to software companies are facing scrutiny due to potential AI disruption.
- Most of the direct lending market is held in structures without on-demand redemption, limiting broad drawdown risks.
- Retail-focused evergreen funds, representing about 20% of the industry's exposure, are considered the main vulnerability.
- Past defaults and excessive capital chasing risky borrowers have soured sentiment towards direct lenders.
- Concerns exist about layered debt on companies through leveraged buyouts.
- Some experts favor lenders financing larger businesses better positioned to withstand economic cycles.
- The rapid expansion of the private credit sector over 15 years could expose weaker lenders during economic downturns.
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