Private credit portfolios show stress levels not seen since 2017

The $2 trillion private credit market is flashing warning signs that haven’t appeared in nearly a decade. Stress indicators across private credit portfolios have climbed back to levels last observed in 2017, according to Financial Times analysis, marking a moment that regulators and fund managers are quietly describing as the asset class’s first genuine trial by fire. Redemptions are piling up fast The most visible sign of strain is showing up in redemption queues. Blackstone’s BCRED, one of the largest and most prominent semi-liquid private credit vehicles, has seen redemption requests hit roughly 7.9% of net asset value, translating to approximately $3.8B in investor withdrawal demands. Blue Owl funds have experienced redemption demand reaching as high as 41%. These vehicles typically cap how much investors can withdraw in any given period, and those caps are now being hit regularly. The fundamental problem is what regulators call a “liquidity mismatch.” Semi-liquid funds promise investors periodic access to their money, but the underlying loans they hold are inherently illiquid. Default rates are climbing, but context matters Beyond the redemption pressure, the credit quality of the underlying loans is deteriorating. Fitch reported that private credit default rates peaked at 5.8% in January 2026. Some other analyses peg current rates closer to 2%, depending on methodology and which corner of the market you’re measuring. Advertisement The growing use of payment-in-kind financing, where borrowers pay interest with more debt rather than cash, is one of those quiet indicators that tends to precede louder problems. PIK arrangements let companies avoid default on paper while their actual cash flow situation worsens. PwC’s Global Private Credit Survey, published in May 2026, identified several sectors facing acute stress: consumer and retail, automotive, hospitality, and technology. Regulators are paying attention Both the Financial Stability Board and the European Central Bank have flagged private credit as a source of potential systemic vulnerability. Their concerns center on valuation opacity and liquidity mismatches. Unlike publicly traded bonds, private credit instruments don’t have market prices updated in real time. Fund managers mark their own portfolios, often quarterly, using models and assumptions that can lag reality by months. Private credit’s rapid growth makes this dynamic more consequential than it would have been even five years ago. The asset class has surpassed $2 trillion in assets under management, up from roughly $800 billion in 2019. What investors should be watching The dispersion across managers and sectors is widening. Funds with heavy exposure to consumer retail or over-leveraged tech borrowers are experiencing markedly different outcomes than those concentrated in healthcare or essential services. For institutional investors with locked-up capital in traditional closed-end private credit funds, the immediate liquidity risk is lower. For investors in semi-liquid vehicles, they’re navigating both credit risk and the structural risk of being stuck behind a growing line of other investors trying to get out. The sectors flagged by PwC, particularly consumer retail and technology, bear monitoring as leading indicators. The automotive and hospitality sectors face their own headwinds that could compound existing stress. Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy .