Private credit, a fast-growing sector, has hit turbulence, but it is premature and unjust to claim that there is something particularly risky, or indeed "shadowy" about this area, CEOs at two asset management houses said yesterday.

Private credit sits under a harsh spotlight because AI risks, fund outflows and market stresses have arisen precisely at a time when policymakers have given retail investors access to private market assets.

But is this fair?

While risks exist, CEOs at investment groups Arcmont Asset Management and Churchill Asset Management – part of the broader Nuveen Private Capital strategy – are scornful of what they see as an unfair critique of private credit. In some ways, they argue that critics are getting matters entirely wrong. As a result, retail investors have been “spooked.”

These firms disagree that such activity can be seen as “shadow banking” or is particularly risky. In fact, they argue that it is in some ways it is more robust, accessible and transparent than the conventional form.

These qualities mean that for some in the private credit space, growth continues at a robust pace.

“In 2025 we deployed €7.5 billion ($8.83 billion) [in investments],” Arcmont Asset Management CEO Anthony Fobel told journalists at a briefing in London’s Mayfair district yesterday. “We are seeing the strongest momentum in fundraising that I have ever seen.”

“All growth predictions show that it will continue to grow really meaningfully,” Fobel continued. 

As far as AI exposure is concerned, about 8 per cent of Arcmont portfolios are potentially exposed to the theme. Earnings growth in the software businesses linked to the portfolios has risen 80 per cent from where it was in 2021. 

At Churchill, the firm has raised a “tremendous amount of dry powder,” Ken Kencel, CEO of Churchill, told the same gathering. “We are seeing record levels of deal activity,” he said. 

Testing times
Recent times have tested private credit funds.

The default rate among US corporate borrowers of private credit rose to a record 9.2 per cent last year, a report in March by credit rating agency Fitch Ratings said (Reuters, 14 April). Private credit funds, aka business development companies (BDCs), have been reportedly affected by higher rates on their bank borrowings. In total, the private credit sector’s $1.8 trillion direct lending segment, competes with traditional banking lending and syndicated loans in areas such as private equity-backed deals.

With AI technology being a major sector, worries that some private credit exposures to AI firms might go awry have added to nervousness. (See this news service’s editorial here.)

Problems have arisen – policymakers in the US, for example, have allowed holders of 401(k) retirement plans to hold private assets in portfolios. In Europe, there are ELTIF funds for similar uses. Large private market players such as KKR, Carlyle and Blackstone have created “evergreen,” aka perpetual or semi-liquid funds to make it easier for novice investors to enter the space. A concern has been that retail investors are generally more likely to hit the exits when trouble brews and are less willing to shoulder the costs of holding a relatively illiquid asset class.

In 2025, outspoken JP Morgan CEO Jamie Dimon described some private credit players as “cockroaches,” and banks’ exposure to the asset class, which expanded rapidly in the decade or more of ultra-cheap interest rates after the 2008 crash, have raised concern. Post-2008, capital regulations tightened traditional bank lending, encouraging a flow into newer channels instead. Back in June last year, our US correspondent heard sceptical views about the private credit trend.

Fobel said Dimon’s comments were unwarranted. “I think people are conflating issues. Banks have lost significant amounts of [business] to private credit and this [criticism] is a rearguard action.” Losses have been in areas such as syndicated loads – which are not the same as private credit, he said. (Syndicated loans are collaborative financial arrangements provided by a group of lenders to fund a single borrower.) 

Not in the shadows
Asked by WealthBriefing if they thought the term “shadow banking” made sense as a label for private credit, Kencel said the term was absurd. “Every single loan in its [Churchill’s] portfolio is valued by an independent third-party firm…every single quarter,” he said. By contrast, unless a bank chooses to do so, it will not disclose which of its specific loans are non-performing, he said. Arcmont’s Fobel said that such loans in private credit BDCs must be valued under rules as “mark to market.”

Robust
Fobel said that an important indicator of his firm’s investment performance – during what has been a turbulent period, going back to the pandemic and beyond – was that traditional bank lending froze during some of these periods and listed debt markets were locked up, but that wasn’t the case with private credit. In terms of return characteristics, funds overall at Arcmont have been “rock solid,” he said. 

Kencel acknowledged some of the difficulties associated with credit markets, but added: “What has been surprising is the reality that if you look at portfolios, what you see is consistent, high-quality performance.”

There is a growing dispersion of returns and a growing concentration of larger, high-performing private credit players, Kencel said. Fobel agreed: In 2025, the top five managers in the private credit space (he included Arcmont in that number) accounted for half of the market. “Active investors are actively seeking the larger managers.”

The move of retail money into the sector, while important and necessary in some ways, has brought certain challenges to light, the CEOs said.

“We have seen an attempt in the US market to force liquidity into what essentially is an illiquid asset class. The term `semi-liquid’ is not how we market private credit BDCs. Illiquid means illiquid,” Kencel said. 

Borrowers from private creditors are increasingly asking how much retail money is involved, he added. (The vast majority of his investors are institutional, as is the case with Arcmont.)    

“I am very optimistic about retail involvement in private credit. What you are going to see is that the next weave of private credit investors will understand what semi-liquid means,” Fobel said.

Debate continues. Tom Stack, managing director, credit research at Cambridge Associates, wrote on 11 November 2025 that problems in certain sectors, such as automobiles, did not suggest that there was a systemic problem with the asset class. "Both cases are idiosyncratic, driven by fraud and unique business practices rather than broad market weakness. Importantly, the impact was felt across both private and traditional credit markets, not just private credit. Fundamentals in private credit remain strong, with no signs of widespread credit deterioration. We continue to see private credit as a compelling source of return and diversification, and we expect commitments to high-quality private credit managers over the next year will continue to outperform comparable public credit opportunities," Stack wrote.