The $2 Trillion Market Where Nobody Can Independently Check the Price

What Private Credit Actually Is

Private credit is a simple idea. A company needs to borrow money. Instead of going to a bank, or selling bonds on the public market, it borrows directly from a specialty lender — often a private equity firm’s lending arm.

That lender then holds the loan, or packages it into a fund that ordinary investors can buy into. These funds are often called BDCs, short for “business development companies.” Think of a BDC as a basket of loans instead of a basket of stocks.

The part that matters for this story: none of this trades on an exchange. There’s no ticker, no daily price, no crowd of buyers and sellers arguing over what a loan is worth. The market is, by design, private.

The Default Number That Moved

Law firm Proskauer runs the closest thing this market has to an official scoreboard: the Private Credit Default Index. It tracks senior, secured loans across the industry.

The index rose two quarters in a row. It stood at 1.84% in the third quarter of 2025. It climbed to 2.46% in the fourth quarter, then to 2.73% in the first quarter of 2026 — the highest reading in the index’s recent history. In the second quarter of 2026, it eased back slightly, to 2.51%.

That is not a crash. It’s a climb, followed by a small step back. But the direction over the past year is clear, and it lines up with a separate warning from the head of the largest bank in America.

Nobody Agrees How Big This Market Is

Before getting to that warning, it’s worth sitting with something odd: analysts can’t agree on how large this market even is.

Depending on which estimate you read, private credit is worth somewhere between $1.7 trillion and $3.5 trillion. Some place it right around $2 trillion. Others, counting more broadly, put it near double that. The gap isn’t a rounding error — it’s roughly the size of the entire U.S. high-yield bond market.

If experts can’t agree on the size of the whole pool, that’s a preview of a harder problem: pricing what’s inside it.

How These Loans Actually Get Priced

A public stock or bond is priced by trading. Buyers and sellers meet, a deal happens, and everyone can see the result. A private credit loan doesn’t have that. Instead, its value is set through something called a “mark” — a periodic valuation the lender assigns to its own loan.

That process isn’t a free-for-all. Under SEC rules for these funds, a board of directors is legally responsible for approving how each loan is valued, and most large lenders bring in outside valuation firms to check their numbers before they’re finalized.

The gap is narrower than “no oversight at all,” but it’s still real. A mark is typically set once a quarter, by people chosen and paid by the lender, and reviewed against models and comparable deals — not tested against an actual buyer willing to pay cash today. Public markets get repriced by strangers every few seconds. Private credit gets repriced by insiders every few months.

What Dimon Is Actually Warning About

JPMorgan CEO Jamie Dimon addressed this directly in his April 2026 shareholder letter. His core argument wasn’t that private credit will collapse — he was explicit that he doesn’t see it as a systemic threat to the banking system, given its size relative to the broader financial system. His concern was narrower, and in some ways more specific: that lending standards have quietly loosened, and that losses will be worse than most people currently expect once a real credit downturn arrives.

Dimon tied that warning directly to the pricing gap described above. In his letter, he pointed out that private credit doesn’t have the same transparency or rigorous valuation marks as public markets — and argued that this makes investors more likely to panic and pull out if conditions worsen, even when actual underlying losses haven’t moved much at all.

The warning didn’t stay theoretical for long. Days later, Blue Owl Capital — one of the largest private credit managers — capped withdrawals at 5% across two of its funds after investors asked to redeem $5.4 billion, equal to 22% of one fund and 41% of a smaller, tech-focused one. Rival managers Ares, Apollo, and HPS all reported smaller but still elevated redemption requests over the same stretch.

The Case for Staying Calm

None of this means the sector is quietly collapsing. There’s a real counter-case, and it deserves equal weight.

Proskauer’s own researchers describe the trend as “modest” and note that private credit default rates remain lower than those in the broadly syndicated loan market — the more traditional, bank-arranged version of the same kind of lending. Most of these loans are also senior and secured, meaning lenders sit near the front of the line to get repaid if a company does fail.

The Q2 2026 pullback, from 2.73% down to 2.51%, is a real data point too. It suggests the sector isn’t sliding in one direction — it’s bouncing around a level that’s elevated, but not alarming on its own. And Dimon himself, weeks later, said he wasn’t “particularly worried” about the sector posing risk to banks like his.

Ludicarc’s Take