What breaks and what holds

Private credit is facing increasing stress from liquidity mismatches, fraud concerns and macro pressures, even as bullish sentiment remains.

Private credit has avoided a “Lehman moment,” but pressures over liquidity, leverage and transparency are building – raising doubts about how much longer the asset class can withstand its visible cracks.

Some investors have a lot. Consider the increase in redemption requests at companies like Morgan Stanley, Apollo Global Management, BlackRock, and Blue Owl Capital. Each firm set a withdrawal of 5% per fund and saw their stock prices decline. At a glance, this exodus of money indicates that the end may be near.

BlackRock’s billionaire CEO Larry Fink attempted to ease fears on an earnings call last week, insisting that institutional demand is accelerating. Meanwhile, financial regulators are raising red flags. Financial Stability Board Chairman Andrew Bailey warned in a letter to the G20 in April that geopolitical tensions, such as the ongoing conflict in the Middle East, could erode asset quality and put further pressure on private credit funds.

This dichotomy has finance professionals scratching their heads and wondering what to do with a significant portion of the $15 trillion private markets ecosystem. If data from UK-based data company Preqin is correct, private debt could reach $4.5 trillion in assets under management by the end of 2030, more than double the $2.1 trillion at the end of 2024. Even with solid fundamentals, private debt’s growing liquidity concerns, leverage risks and macroeconomic pressures are testing its resilience.

liquidity mismatch problem

“This is not the story of a single firm,” former Nasdaq vice chairman David Welk told Global Finance. “It’s sector-wide.”

Fink may be right; Weild, now an advisor to the private-credit platform CoreInside, said private credit offers attractive risk-adjusted returns. “However, if the claim is that you can deliver those returns inside a vehicle that promises quarterly or monthly liquidity to retail investors, one will inevitably find that in times of market stress, the demand for liquidity will exceed the short-term supply of liquidity.”

The recent turmoil in private credit has raised questions about whether 2026 could bring widespread layoffs. The industry is facing increasing scrutiny over fraud risks, regulatory pressure and the impact of AI-driven disruption. Transparency concerns are also weighing on investor confidence, highlighted by automotive parts supplier First Brands Group, which has filed for bankruptcy protection and allegedly hid billions of dollars of debt from lenders, including exposures in private credit accounts held by BlackRock.

Given its large share in the private loan portfolio, software lending has come under special focus. AI-driven disruption is now raising concerns about future credit losses.

“The combination of AI-driven disruption in enterprise software valuations, tighter lending standards, and redemption pressure on BDC vehicles that normally offer refinancing capabilities creates a complex problem,” Welk said. “Given the impact of AI on that industry, some private credit funds are already moving away from software companies altogether.”

what needs to change

Pratha Reddy, president of Percent, said private credit bulls need to rethink “real structural challenges,” such as how capital is raised, how vehicles are structured, and what level of education advisors need to pursue. Lack of accessible data, limited liquidity and inadequate options for tailored performance also deter him.

“We are definitely in a tense situation now,” Reddy said. “Going.” [these issues] “Unattended wealth management channels leave huge amounts of capital on the table.”

Private debt may be under the microscope, but some private equity players continue to cash in. Ares Management raised $9.8 billion for an opportunistic credit strategy, Adams Street Partners closed its $7.5 billion Private Credit III fund, and The Carlyle Group raised $1.5 billion in seed funding for a new asset-backed finance vehicle.

“For private debt to continue to operate at this scale, liquidity structures, leverage levels and repayment timelines all need to remain aligned as exits take longer and refinancing becomes more selective,” said Jun Lee, EY’s global and Americas wealth and asset management leader. Tension arises when those assumptions are simultaneously broken.

“The real stress scenario could involve refinancing risks associated with slower withdrawals and changes in liquidity expectations, particularly if capital is locked up for longer than anticipated and operating models are not built to absorb that pressure,” Lee said.

Banks pay the price of relationships again

Big banks – both competitors and partners of non-bank lenders – are trying to stay quiet.

For example, JPMorgan Chase CEO Jamie Dimon downplayed concerns about the private credit sector in an April 14, 2026 earnings call. This is a sharp contrast to his stance last year, when Dimon called the bankruptcy proceedings of First Brands and Tricolor – two companies that depended on private debt – “cockroaches.”

JPMorgan Chase is now tightening some relationships with private credit funds to limit exposure amid the volatility. Goldman Sachs and Barclays are taking a similar risk-management approach.

“On the one hand, the fundamentals still look supportive of institutional capital as banks are pulling back,” Lee said. On the other hand, pressures are building around liquidity, leverage and refinancing, which naturally raises systemic questions.

As Lee said: “It doesn’t look like a final game, but it looks like a decisive moment.”

what will happen next

From here, Lee is predicting that private credit will split between managers who can work through longer cycles, tighter liquidity and more scrutiny, and those who can’t.

“Some strategies may struggle, but the broader market is still growing rather than stagnant,” Lee said. “The outcome will depend less on a shock and more on how well companies adapt to a more demanding environment.”

Other observers are more optimistic. Attorney Derek Ladginsky, a partner specializing in private debt at Katten Muchin Rosenman, argued that experienced market participants will eventually work through the sector’s challenges.

Ladginsky said, “The Avengers are closer to the end game than personal credit.” “The tombstone for personal debt has been written many times before.”

Ladginsky said that while cyclical pressures exist across all asset classes, the deeper challenge in private debt is liquidity mismatches – a result, in part, of its strong historical track record and significant investor flows chasing forward-looking returns.

Still, any “stickiness” would ultimately strengthen the sector, he said. “And the current sound news and headlines about any death news will soon be forgotten.”

Editor’s note: An earlier version of this story had the wrong precinct. estimate and has since been corrected.