Global funds revealed mounting concerns about private credit risks as the sector’s assets surged to a record $1.7 trillion, with Blackstone Inc. ($BX) and Apollo Global Management ($APO) highlighting the trend. Global funds warn private credit risk may be underestimated. Why are investors rethinking their allocations amid this momentum?
Private Credit Assets Hit Record $1.7 Trillion: Global Funds on Alert
Direct lending and private credit assets reached $1.7 trillion globally as of October 2025, up 15% from $1.48 trillion a year prior, according to Preqin data. Notably, Blackstone Inc. ($BX) and Apollo Global Management ($APO) each reported double-digit growth in private credit holdings in their Q3 2025 filings. The surge follows a period where traditional banks pulled back loan issuance by 7% year-over-year (S&P Global, September 2025). Despite higher yields—averaging 11.2% on new private loans versus 7.3% in leveraged loans—institutions such as the International Monetary Fund have warned about mounting default risks as underwriting standards loosen (IMF Global Financial Stability Report, April 2025).
How Surging Private Credit Risks Affect Broader Credit Markets
The explosive growth in private credit is reshaping credit markets—and raising systemic concerns. In 2025, the sector has accounted for 35% of all new corporate loans in the U.S., doubling its share from 2018, per Moody’s Investors Service. High-yield debt spreads, meanwhile, widened by 45 basis points since June as investors demanded higher compensation for perceived risk. Regulators including the U.S. Federal Reserve cited the “opaque nature” of private credit, which lacks the disclosure and oversight typical in public debt markets (Federal Reserve Financial Stability Report, May 2025). This raises concerns about contagion if default rates—currently at 3.9% in private credit portfolios—trend towards the 5% mark seen during past downturns.
Portfolio Strategies Amid Private Credit Risk: What Investors Should Do
Investors managing exposure to private credit now face a strategic crossroad. Pension funds, insurers, and multi-asset managers have boosted allocations to private credit by 20% since 2023, seeking yield amid persistent volatility in public bonds (Bloomberg, October 2025). However, institutional strategists are increasingly recommending thorough due diligence on managers and portfolio transparency. Investors with high exposure may consider diversifying into more liquid fixed-income assets, or adjusting risk frameworks to account for potential drawdowns. It’s critical to monitor metrics like debt-to-EBITDA ratios and changes in loan covenants as red flags, while following stock market analysis and latest financial news updates for cross-asset ripple effects. Diversification and active risk management are now viewed as essential against the backdrop of rising default warnings.
What Market Analysts Expect for Private Credit in 2026
Market strategists note that while institutional demand for private credit remains high, rising funding costs and macro uncertainty may pressure returns in 2026. According to analysts at Moody’s and Fitch Ratings, elevated rates and a potential turn in the credit cycle could result in higher loss ratios, particularly in loans made with wide covenant exceptions. Industry analysts observe that greater regulatory scrutiny is likely, with the SEC and Fed intensifying their focus on private market disclosures as volatility persists.
Private Credit Risk Signals New Era for Global Funds Allocation
Global funds warn private credit risk is evolving as the sector matures, with transparency and oversight expected to become key differentiators for both managers and investors. Stakeholders should closely track regulatory developments and sector performance ahead of 2026. Proactive risk assessment and flexible allocation strategies will be vital for navigating a rapidly changing credit landscape.
Tags: private credit, $BX, $APO, global funds, credit risk
