Private Credit’s Push for Retail Money Stokes New Vulnerability

Private credit’s rush to attract money from retail investors is making the sector more vulnerable to the kind of liquidity mismatches found in traditional lenders, the Bank for International Settlements warned in a report on Tuesday.

Direct lenders usually provide long-term loans that match the duration of their funds, a setup that allows many in the industry to argue that private credit doesn’t pose systemic risk. But money managers have increasingly turned to structures that allow mom and pop investors to regularly redeem a portion of their investment, creating a potential problem if investors were to demand money back during market turmoil.