While direct lending to sponsor-backed software companies was a winning formula for much of the past decade, the model has come under pressure as AI disruption has called into question long-term growth assumptions across parts of the sector. Beyond this segment, however, private credit spans a far wider universe: structured credit, asset-backed finance, real-asset lending secured by aircraft and infrastructure, and convertibles.
Europe, and now Asia, are attracting increasing amounts of capital amidst clear funding gaps due to risk-averse banking systems and over-regulation. A well-constructed multi-strategy portfolio, where no single sector exceeds 5% of exposure, may be only marginally impacted even by a structural shift such as the rise of artificial intelligence.
More generally, when you extrapolate from gated semi-liquid retail vehicles to the collapse of private markets as a whole, you are prey to a well-known heuristic. Research on geopolitical shocks and investor decision-making shows that analysts and investors alike tend to reach for the most dramatic historical precedents (the 1907 trust company panic and the global financial crisis), rather than the more numerous and more probable mundane outcomes.
The GFC comparison fails on its own structural terms. The 2007 to 2009 crisis was a funding-mismatch catastrophe: overnight asset-backed commercial paper financing illiquid mortgage assets, with 30x to 40x leverage and no transparency. Today’s private credit is senior secured floating-rate lending, 1x to 1.25x leverage at the BDC level, with quarterly gating that functions as the lender-of-last-resort.
Moreover, gating is a feature of private markets, not a bug. The gates are not evidence of systemic failure; they are the mechanism working exactly as designed, preventing forced sales at the worst moment. Long-term investors deliberately accept this illiquidity in exchange for a premium.
Private credit has a concentration problem in one segment, a temporary redemption management challenge in one product type, and a sentiment problem in one distribution channel (retail investors). It does not have a systemic solvency problem or a funding-mismatch crisis. Preqin’s November 2025 survey found that 81% of limited partners plan to hold or increase private credit commitments. The asset class is on track to reach $4.5 trillion by 2030.
Private markets are less standardized, with more bespoke risk-return drivers, and a greater emphasis on manager selection and underwriting skills. They are an investment universe, not an asset class, and because of that, they are not correlated.
The problem is that private markets have only recently stepped into the public discourse, and the conversation has not yet caught up with the complexity they demand. Financial journalists, for the most part, approach them with scant knowledge and a public markets mindset, reaching for familiar frameworks that simply do not apply. Volatility, liquidity, and daily pricing are largely beside the point in private markets, yet they remain the default lens.
Practitioners bear some responsibility too: the industry has long been guilty of speaking to itself, wrapping straightforward concepts in layers of alienating jargon.
The result of this mismatch is that retail investors, bombarded with half-formed narratives and sensational headlines, are left poorly equipped to evaluate the opportunity. Professional investors, who know more have little incentive to correct the record. And panicky headlines that claim “the music has stopped” or “the bubble is bursting” do far more to stoke anxiety than to illuminate reality, leaving the very investors who might benefit most from private markets on the sidelines.
Alfonso Ricciardelli, CFA, is a co-editor of CFA Institute Research Foundation’s An Introduction to Alternative Credit.
