Private Credit - direct lending by non-banks to mostly mid-size companies - has expanded into trillion-dollar territory. The Bank of England's Financial Policy Committee has flagged the sector as one of the more opaque corners of global finance.

Key takeaways

  • Global private credit AUM has exceeded $1.5 trillion (industry sources, BoE FPC commentary).
  • Direct lending often comes with covenant-lite terms.
  • Non-bank lenders are less regulated than banks.
  • Valuation marks can lag distress.
  • Some private credit is accessible via listed UK Investment trusts.

How private credit grew

Post-2008 Capital rules pushed mid-market lending out of banks. Pension funds and insurance companies chased the Yield premium.

Why regulators are watching

Concentration, Leverage, opacity and pro-cyclicality are recurring concerns in BoE and IMF reports.

How retail investors are exposed

Some UK-listed investment trusts (BDC-style structures) hold private credit positions. Always check the latest holdings, gearing and discount.

What this means for UK investors

Private credit is unlikely to cause a 2008 repeat, but it can amplify a downturn. UK investors should know whether their funds hold direct lending exposure.

Risks to watch

  • Valuation lag in falling markets.
  • Liquidity mismatch in open-ended structures.
  • Concentration in cyclical borrowers.
  • Limited transparency on underlying loans.