Key Takeaways
- • Global non-bank financial institution (NBFI) assets reached $257 trillion at end-2024, more than half of total global financial assets, according to the Financial Stability Board (FSB); private credit within that is estimated at $1.5–2 trillion, though broader definitions place it at $10–50 trillion.
- • Retail investors' share of private credit funds has risen from near zero to 13 per cent over the last decade, while the US Department of Labor proposed in March 2026 opening 401(k) accounts to alternative assets including private credit.
- • Private equity-based insurers in the US control nearly $900 billion in liabilities, up from $67 billion in 2012, creating direct links between private credit and insurance balance sheets.
- • Roughly one-fifth of private credit loans are to software-as-a-service (SaaS) companies whose business models are threatened by AI, and redemption pressure has contributed to declines in software and BDC stock prices.
- • Chatham House argues regulators must standardize private credit definitions, secure cross-border data access, and ensure retail investors understand the products and their risks before private credit becomes systemically important.
Summary
A Chatham House analysis argues that financial regulators need to act before private credit matures into a systemically important asset class. Citing the Financial Stability Board, the piece places global non-bank financial institution assets at $257 trillion by the end of 2024, more than half of total global financial assets. Private credit, defined as lending by dedicated funds to typically mid-sized companies, is estimated at $1.5–2 trillion on a narrow basis, rising to $10–50 trillion when distressed debt, asset-backed lending, commercial real estate, consumer finance and corporate finance are included. The market grew from around $40 billion in 2000, a rise driven by ultra-low interest rates between 2009 and 2022, tighter bank regulation and the expansion of private equity. The US accounts for over 87 per cent of origination in 2025, with Europe, the UK and Canada making up most of the remainder.
The article identifies several sources of concern. The FSB warns of deteriorating credit quality indicators and opaque default and valuation practices. US funds increasingly offer periodic partial redemption windows, a feature that attracts retail investors but adds liquidity risk. Exposure is concentrated in services, technology and healthcare borrowers, many of whom lack public credit ratings or cluster around B- ratings and are more leveraged than syndicated loan borrowers. Investors in these funds have no deposit insurance and no access to emergency liquidity support available to banks. The piece also flags links to banks through partnerships, lending to fund investors, direct fund investments, private CLO purchases and synthetic risk transfers, which may complicate bank risk assessment and stress testing. Five large asset managers account for one-third of aggregate private credit loan commitments, and operating private equity and private credit under one roof raises conflict-of-interest risks. Cross-border fund structures further complicate oversight.
Chatham House draws parallels to the 2008 crisis, when layered leverage in CDOs and credit default swaps magnified losses far beyond the roughly $1.3 trillion in subprime mortgages. It recommends standardizing private credit definitions to gauge market size, coordinated international efforts to obtain the data needed to assess systemic risk without imposing overly onerous reporting on private funds, and cross-sectoral, cross-border financial stability arrangements. It credits the FSB's work since the Global Financial Crisis but argues that retail investors, including 401(k) participants, need clearer disclosure, diversified loan books, liquidity provisions and greater transparency on leverage and risk.
The article identifies several sources of concern. The FSB warns of deteriorating credit quality indicators and opaque default and valuation practices. US funds increasingly offer periodic partial redemption windows, a feature that attracts retail investors but adds liquidity risk. Exposure is concentrated in services, technology and healthcare borrowers, many of whom lack public credit ratings or cluster around B- ratings and are more leveraged than syndicated loan borrowers. Investors in these funds have no deposit insurance and no access to emergency liquidity support available to banks. The piece also flags links to banks through partnerships, lending to fund investors, direct fund investments, private CLO purchases and synthetic risk transfers, which may complicate bank risk assessment and stress testing. Five large asset managers account for one-third of aggregate private credit loan commitments, and operating private equity and private credit under one roof raises conflict-of-interest risks. Cross-border fund structures further complicate oversight.
Chatham House draws parallels to the 2008 crisis, when layered leverage in CDOs and credit default swaps magnified losses far beyond the roughly $1.3 trillion in subprime mortgages. It recommends standardizing private credit definitions to gauge market size, coordinated international efforts to obtain the data needed to assess systemic risk without imposing overly onerous reporting on private funds, and cross-sectoral, cross-border financial stability arrangements. It credits the FSB's work since the Global Financial Crisis but argues that retail investors, including 401(k) participants, need clearer disclosure, diversified loan books, liquidity provisions and greater transparency on leverage and risk.
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