Money & Finance › Banks & credit › Shadow banking: credit outside the banking system
Private credit funds
Boom since 2010s· Asset or instrument
Fact, law or dataA rule, statute, definition or measured number.
Private credit funds lend directly to companies, mostly mid-sized and often private-equity-owned, in place of banks or bond markets.
See it on the Money & Finance map →How it works
Managers such as Apollo, Ares, Blackstone and Blue Owl raise money from pensions, insurers, endowments and wealthy individuals, then make loans that are usually senior, secured and floating-rate, at roughly 5 to 7 points over SOFR. Borrowers pay more for speed and certainty. Growth took off after 2008, as stricter rules pushed banks away from riskier corporate loans. The IMF estimated about $2 trillion in assets and committed capital in 2023. Individuals can get exposure through business development companies (BDCs) and interval funds.
Why it matters
It has become a major source of corporate and real estate debt outside the banking system, and a growing piece of insurers' and retirement savers' portfolios.
Think of it like
Like a debt fund writing a bridge loan a bank won't: faster and more flexible, at a higher rate.
Facts, rules and data
The IMF's Global Financial Stability Report (April 2024) and Fed Financial Stability Reports track its size; BDCs file with the SEC; Preqin and PitchBook collect fund data.
Debates and risks
It has not been tested by a long, severe default cycle. Loan values are set by managers, not markets, and failures like First Brands in 2025 raised underwriting questions.
Connections (9)
▸Shadow banking: credit outside the banking system includes Private credit fundsFact, law or data
The connection
Private credit funds make loans banks used to make, without taking deposits. Unlike money funds or repo, they lock investors in for years, so classic runs are less likely. But they borrow from banks themselves, and bank lending to nonbank lenders has grown fast, tying the two systems together.
When and why
Grew after 2008 as Basel III and 2013 US leveraged-lending guidance pushed banks back; the IMF estimated about $2 trillion globally in 2023.
How we know
The IMF's April 2024 Global Financial Stability Report and Fed Financial Stability Reports classify it as nonbank lending and flag banks' rising loans to it.
Debates and risks
Whether it is safer than bank lending, thanks to locked-up capital, or a hidden risk because of opaque valuations and layered leverage, is debated.
▸Private credit funds grew alongside Private equity and leveraged buyoutsFact, law or data
The connection
After 2008, tighter rules made banks wary of lending to heavily indebted mid-sized companies. Private credit funds filled the gap, and most of their direct loans go to companies owned by PE firms. The big firms, such as Blackstone, Apollo, KKR and Ares, now run both businesses, raising money from the same pensions and insurers.
When and why
Mainly since the 2010s; global private credit reached roughly $2 trillion by 2024–25, by IMF and industry estimates.
How we know
The IMF's April 2024 Global Financial Stability Report documents the market's size and its heavy lending to PE-owned borrowers.
Debates and risks
These loans rarely trade, so losses may surface late; several 2025 borrower bankruptcies renewed debate over hidden risks and links back to banks.
▸Alternative investments: private funds, art and collectibles increasingly include Private credit fundsFact, law or data
The connection
Alternatives are assets outside public stocks, bonds and cash. Private credit became one of the fastest-growing, as pensions and endowments sought yields near 10%. Managers now market it to wealthy individuals through nontraded BDCs and interval funds, and a 2025 executive order encouraged offering alternatives in 401(k) plans.
When and why
Took off in the 2010s; the August 2025 executive order directed the Labor Department to revisit its 401(k) guidance on alternatives.
How we know
Preqin and PitchBook fund data; SEC filings by BDCs and interval funds; the White House order itself.
Debates and risks
Whether individuals are paid enough for limited withdrawals, high fees and manager-set valuations is debated, as is how these funds would handle a wave of redemptions.
▸Insurance companies: pooling risk and investing premiums increasingly fund Private credit fundsFact, law or data
The connection
Private-equity firms bought or partnered with life insurers, such as Apollo with Athene and KKR with Global Atlantic. They invest annuity premiums in private loans and asset-backed credit their own funds originate, earning extra yield. Insurers have become one of private credit's biggest sources of long-term money.
When and why
Apollo founded Athene in 2009 and merged with it in 2022; KKR bought into Global Atlantic from 2021; Blackstone and Brookfield made similar moves.
How we know
NAIC data show private and privately rated assets rising in insurer portfolios; the Fed, the IMF and the Bank for International Settlements have flagged the trend.
Debates and risks
Whether the extra yield reflects skill or hidden risk is unproven; Bermuda reinsurance and manager-set valuations make insurers' exposure hard to judge.
▸Mezzanine loans secured by the owner's LLC interests are a staple of Private credit fundsFact, law or data
The connection
Banks rarely hold mezzanine loans because capital rules treat them as risky. Private credit funds, insurers and mortgage REITs, with lighter rules and an appetite for higher yields, became the main mezz lenders, earning roughly 10–15% for the slice just below the senior loan.
When and why
Large managers such as Blackstone, Apollo, Ares, KKR and Starwood, especially since about 2010 as bank rules tightened.
How we know
Fund and mortgage REIT filings list mezz holdings; industry surveys track private real estate debt fundraising.
Debates and risks
With private credit at roughly $1.5–2 trillion worldwide (2024–25, estimates vary), regulators debate whether its lightly disclosed loans, mezz included, hide risks.
▸CRE debt funds and mortgage REITs: the non-bank lenders are the real estate arm of Private credit fundsFact, law or data
The connection
Private credit means loans made by funds rather than banks. Most lends to companies; CRE debt funds are the property slice, often run by the same managers, such as Blackstone, Apollo, Ares and KKR. Both raise money from pensions and insurers and fill gaps left by banks.
When and why
Grew after 2008; private credit reached roughly $1.5–2 trillion worldwide by 2024–25 (estimates vary), with real estate debt a smaller share.
How we know
Fund filings, Preqin and IMF estimates of private credit's size, and the Fed's Financial Stability Reports.
Debates and risks
Regulators and investors debate whether private credit spreads risk safely or builds hidden leverage that could strain the banks that lend to it.
▸Private credit funds competes for buyout borrowers with Syndicated and leveraged loans, and the CLOs that buy themFact, law or data
The connection
When a private-equity firm buys a company, it can borrow from a bank syndicate or a private credit fund. Funds offer speed, certainty and confidential terms at a higher spread; syndicated loans are cheaper but depend on market mood. In 2022–23 private credit won many deals; in 2024–25 banks won many back by refinancing them.
When and why
US buyout financing since the 2010s, with lenders such as Ares, Blackstone and Apollo competing against bank arrangers like JPMorgan and Goldman Sachs.
How we know
PitchBook LCD tracks deals moving between the two markets, including refinancings of private loans into syndicated loans.
Debates and risks
Which market's loans will lose more in the next default wave, since private loans are valued by their own managers.
▸Factoring and forfaiting: selling receivables for cash now is increasingly funded by Private credit fundsMainstream view
The connection
Banks once supplied most receivables finance. Since the 2010s, private credit and 'asset-based finance' funds buy invoices directly or fund factoring and supply-chain finance platforms, earning steady short-term yields. The model works only if the invoices are real and customers pay into accounts the fund controls.
When and why
In the US and Europe from the 2010s; the failures of Greensill Capital (2021) and First Brands (2025) exposed the risks.
How solid is the link?
First Brands' bankruptcy filings, listing about $2.3 billion of factoring-related liabilities, and Jefferies' disclosure of about $715 million of receivables in its Point Bonita fund.
Debates and risks
Whether First Brands' invoices were faked or sold more than once, as January 2026 federal charges against its founder allege, and how many other funds hold similarly weak claims.
▸Data centers: the AI-driven building boom are increasingly funded by Private credit fundsFact, law or data
The connection
Data centers cost billions each, more than tech companies want on their own balance sheets. Private credit funds and insurers lend against the long leases instead. In October 2025 Meta and Blue Owl formed a joint venture for the Hyperion campus in Louisiana, about $27 billion of costs funded largely by privately placed bonds bought by PIMCO and others.
When and why
US, 2024–26; the Hyperion deal, signed October 2025, was described as the largest private-credit transaction on record.
How we know
Meta and Blue Owl announcements, S&P's A+ rating of the bonds, and coverage in Bloomberg and The Wall Street Journal.
Debates and risks
Whether keeping this debt off tech balance sheets hides risk, and what lenders face if AI tenants leave early, is debated; Meta guaranteed a minimum value.