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Private credit has become the financial market’s favorite source of anxiety. Concerns about its rapid growth, relatively less liquid nature when compared to public credit and a handful of high-profile corporate failures have compounded to lead some to conclude that the next systemic problem must be lurking in non-bank lending.
That concern is understandable. But it is also overdone and rests on several misconceptions. The first is that private credit is new. This is simply not true. For at least 150 years insurance companies have lent to companies through private transactions, understanding that long-dated private credit assets were a highly suitable match for their similarly long-dated liabilities. Within our company alone, we have been operating in private credit for 75 years.
Equally, direct lending, which has attracted the most opprobrium in recent months, is also not new. It has certainly become more popular in recent years, but the more meaningful change is the scale, investor base and the range of borrowers using it. That growth deserves scrutiny, but not alarm.
Alongside the perception that private credit is new is one that it is inherently risky. But private credit is a prosaic industry: direct lending consists of senior secured loans made to companies that need long-term capital, underwritten by lenders whose primary motivations are getting their principal back, not generating heroic upside.
Originally published in FA Magazine on October 14, 2026
To view the full article, visit FA Mag’s site: Private Credit: Reality Check
Dianna Carr-Coletta
Head of Non-Sponsored Middle Market Direct Lending
PGIM
The information contained herein is provided by PGIM, the principal asset management business of Prudential Financial, Inc. (PFI), and a trading name of PGIM, Inc. and its global subsidiaries and affiliates. Please visit the Important Disclosures page on www.PGIM.com for additional information.
Views are those of PGIM investment professionals as of the date of publication and are subject to change without notice. This information is for informational and educational purposes only, does not consider any investor's objectives or financial situation, and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security. Certain information has been obtained from sources that PGIM believes to be reliable; however, PGIM does not guarantee its accuracy or completeness and has no obligation to update it.
All investments involve risk, including the possible loss of capital. Private credit investments are generally illiquid, are often made to below-investment-grade borrowers, and are subject to credit, default, interest rate and liquidity risks. A senior position in the capital structure does not guarantee repayment or recovery.
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