For the past several weeks, investors have understandably focused on developments in the Middle East. The headlines are constant, and markets often exhibit elevated volatility with every new development.
But investors should not lose sight of other important developments taking shape across capital markets. Private credit is one area worth a closer look, in my view.
For readers who may be new to private credit, it is a segment of the market where investment funds provide loans rather than traditional banks. The industry expanded rapidly after the Global Financial Crisis, when tighter banking regulations limited how aggressively traditional lenders could finance riskier borrowers. Capital moved to nonbank lenders such as asset managers, pension funds, and private investment firms that stepped in to fill the gap.1
Stronger rules made banks safer, but more lending activity shifted into institutions operating outside the traditional regulatory framework. The risks in the financial system did not disappear with this change, they just shifted.
One area drawing attention today is redemption pressure in funds that market themselves as semi-liquid vehicles. The $33 billion Cliffwater Corporate Lending Fund, for instance, recently reported that investors asked to withdraw roughly 14% of the fund’s assets in a single quarter. Because the fund limits withdrawals to 5%, it agreed to repurchase only about half of those requests, with the remainder pushed into future redemption windows.
Similar pressures have appeared elsewhere across the industry. Blackstone’s $82 billion credit fund recently reported net withdrawals for the first time, while firms including Blue Owl, BlackRock, and Morgan Stanley have limited investor withdrawals to preset quarterly caps. These limits are not unusual in private markets, but when investors want their money back, those limits can become far more noticeable.
Valuation practices are also drawing new scrutiny.
Private-credit portfolios can contain thousands of loans and investments that do not trade publicly, meaning their values must be estimated using models and assumptions rather than observable market prices. Cliffwater’s filings show that roughly 71% of its assets are classified as “Level 3,” meaning their valuations rely heavily on unobservable inputs. The fund also invests billions of dollars in other private-credit vehicles and relies on those managers’ reported net asset values, rather than independently determining prices. That’s a slippery slope, in my view.
The result can resemble what one observer described as a financial system of “black boxes inside black boxes,”2 where investors rely on layers of valuation judgments that are difficult to independently verify. In stable periods, this structure rarely attracts much attention. But when investors begin questioning valuations, the lack of visibility can suddenly matter a great deal.
The issues I’m describing above land at a time when the industry is becoming increasingly reliant on individual investors. Until recently, private credit was historically dominated by pensions, endowments, and other institutions with long investment horizons. But in recent years, asset managers have increasingly marketed these strategies directly to individuals through interval funds, wealth platforms, and specialized vehicles. Policymakers in Washington are also considering steps that could make it easier for retirement plans to include private investments.
Large firms such as Apollo Global Management, Blackstone, BlackRock, and Blue Owl have made retail distribution central to their growth strategies. For these firms, such a strategy makes good business sense—retail savings pools, including the $12 trillion 401(k) market, represent a vast potential source of capital. The question is whether these strategies make sense for most everyday investors.
Private-market investments typically involve higher fees, less transparency, and more limited liquidity than traditional public securities. For individual investors, the main issue is that these funds often do not work like the rest of a traditional portfolio. Shares may only be redeemable at certain intervals, withdrawals can be capped when demand is high, and reported values may not adjust as quickly as public market prices. That can make these strategies appear steadier on paper, while leaving investors with less flexibility and a murkier picture of risk in real time. Which for many, is the opposite of what you’re seeking in today’s geopolitical environment.
Bottom Line for Investors
To be fair, I do not think we have an impending crisis on our hands, at least not at this stage. Many private-credit loans continue to perform, and recent stresses appear concentrated rather than systemic. But it is still a story worth watching, because moments like this reveal how these structures behave when sentiment shifts—particularly with respect to liquidity, valuation, and investor expectations.
1 Wall Street Journal. March 12, 2026. https://advisor.zacksim.com/e/376582/-private-credit-craze-d0fbb8af/5v89tw/1489468160/h/bt-JCfBLTQvvBhTkEVYLJphQywjni31WsEN892p2mHE
2 Wall Street Journal. March 12, 2026. https://advisor.zacksim.com/e/376582/-private-credit-craze-d0fbb8af/5v89tw/1489468160/h/bt-JCfBLTQvvBhTkEVYLJphQywjni31WsEN892p2mHE
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