Will Private Credit «Cockroaches» Become Too Unbearable?
The private credit market is facing a series of negative high-profile events, including defaults and gating of funds. Does this spell the beginning of the end of the asset class?
Private credit has grown rapidly over the past two decades as banks’ aversion to risky lending and investor demand for yield continues to fuel the asset class. According to a report by Moody's, the overall market size is expected to exceed $2 trillion in assets under management in 2026 and approach $4 trillion by 2030.
Despite the growth trajectory, there has recently been a series of negative high-profile events. This includes the bankruptcies of borrowers like auto parts supplier First Brands and car dealership Tricolor, alongside redemption pressures at alternatives houses, most notably the gating of a fund managed by New York-based Blue Owl.
Such incidents have prompted financial industry leaders to voice out concerns with J.P. Morgan boss Jamie Dimon issuing a warning last year with the now infamous metaphorical reference that «when you see one cockroach, there’s probably more».
Ripples in Asia
The worries have extended to fund distributors and investors in Asia, most notably within the private banking industry.
According to a «Bloomberg» report citing unnamed sources, the Hong Kong Monetary Authority has contacted private banks to assess the private credit funds they are distributing and the scale of those exposures.
Bubble or Not?
Many in the industry agree that more cockroaches will be revealed. A Fitch Ratings report said that the default rate among US corporate borrowers of private credit rose from 8.1 percent in 2024 to a record 9.2 percent in 2025. In a «Financial Times» report, Steffen Meister, chairman of Swiss private markets firm Partners Group, foresees that there is «a good chance that we see default rates double in the next few years».
However, few believe that the troubles will be unbearable. A report by US alternatives manager Hamilton Lane said that it «does not believe there is a private credit bubble», adding the asset class is in its «silver age» with limited signs of stress.
In Julius Baer’s monthly CIO report for March, it states that «the financial system is safer with private debt than without it» due to it being a more stable funding model than commercial banking, lower leverage and moderate size in relation to the US economy when compared to subprime mortgage lending before the 2008 crisis.
