Revisiting the risks around private credit

Private credit funds have attracted growing scrutiny amid falling valuations and its exposure to software companies. Under a severe default scenario, losses might amount to around 0.4% of US GDP. That would be material but manageable and far from systemic, particularly since the Federal Reserve would act to contain any spillovers to banks. However, private credit has become an important source of financing for mid-market companies, so a pullback in lending could tighten credit conditions for these firms.