Private credit growth slows as lending activity, fundraising and flows cool

The rapid expansion of private credit markets is showing signs of deceleration, with both lending volumes and investor inflows weakening in recent months amid tighter liquidity conditions and increased scrutiny of loan quality, according to a report by Reuters citing data from PitchBook.
The figures show that new direct lending issuance in the US private credit market fell to approximately $44.8bn in the three months to May 2026, representing a decline of around 40% compared with $74.6bn in the first quarter.
The slowdown was particularly pronounced in lending to private equity-backed borrowers, which dropped by nearly 37% over the same period to about $28.5bn. Direct lending associated with leveraged buyouts also decreased by roughly one-third, reflecting reduced deal activity and more cautious underwriting conditions.
The cooling trend suggests a maturing phase for the asset class, as managers face a combination of softer fundraising, higher redemption requests and renewed competition from syndicated loan markets, where pricing has become more attractive for borrowers.
Loan performance concerns have also increased, particularly in sectors such as software, where credit exposure is widespread across both leveraged finance and private credit portfolios. Performance weakness in parts of the software debt market has added to investor caution regarding underwriting standards and downside risk.
Fundraising momentum has also eased compared with recent peaks. Data from Preqin indicates that private credit funds raised around $45bn in the first four months of 2026, broadly in line with the same period last year but below levels seen in 2023, when inflows were stronger across alternative credit strategies.
At the same time, liquidity pressures have become more visible in the retail and institutional segments. Several large managers have implemented redemption limits after withdrawal requests exceeded quarterly thresholds, including major private credit vehicles managed by Blackstone Inc. and Cliffwater LLC, highlighting growing sensitivity among investors to liquidity timing and valuation uncertainty.
Industry data also suggests that retail alternative investment flows have weakened, with private credit allocations declining sharply on a month-to-month basis in recent reporting periods, reflecting a broader slowdown in demand from wealth channels.