Loans originated by investment funds that are not banks. Chapter 10.
From The AI Compute Race. Read the book
Where the book uses it
- Chapter 10 — The Lender’s Decision
Who is lending the money and who bears the loss: the bonds, leases and guarantees behind the largest campuses, and how the paper reaches ordinary retirement accounts.
Sources that use it
- Board of Governors of the Federal Reserve System, Financial Accounts of the United States (Z.1), table F4.4.s, “Private credit loans,” release of 11 September 2026 (private-credit loans, “privately negotiated loans to businesses that are originated by nonbank investment funds”, $1,539.9 billion outstanding at the end of the second quarter of 2026, $470.2 billion of it held by business development companies; held by private debt funds $554.1 billion, interval and tender offer funds $79.9 billion, issuers of asset-backed securities, which are CLOs, $55.1 billion and the rest of the world $380.5 billion; the table’s lines are lenders and borrowing sectors, not the purpose of the loans; the definition is from the release’s description of instrument tables, and the units are confirmed on FRED’s page for series BOGZ1FL893067205Q). In the Sources
- Eric Platt, “Blue Owl hit by $4.7bn of redemption requests as investor exodus persists,” Financial Times, 2 July 2026 (the paper’s own tracker: “Redemption requests at the 20 funds across the sector tracked by the FT hit $22bn in the quarter,” “the median request increasing to 8.7 per cent of the funds’ assets” from 7.1 per cent the quarter before, and “Private credit funds have honoured less than 40 per cent of the redemption requests they have received, the FT analysis shows”; Blue Owl’s two non-traded funds’ requests “at 38 per cent for Blue Owl Technology Income Corp and almost 19 per cent for Blue Owl Credit Income Corp,” both capped at 5 per cent, from the funds’ letters of that day; read whole on a subscription on 17 October 2026; the same sentence goes on “leaving more than $14bn of capital locked up in the vehicles”). In the Sources
- European Central Bank, Financial Stability Review, May 2026, special feature, “Stress in global private credit markets and its implications for euro area financial stability” (an illustrative exercise in three stages, direct private credit losses, additional losses from loans to software firms in correlated leveraged debt markets, and broader second-round market revaluations: “Insurance corporations face the largest impact in absolute terms, stemming from their larger and less senior exposures to private credit”; “Pension funds are the most heavily affected by aggregate losses from all three stages in terms of total assets”; banks’ losses “not exceeding 1.3% of total equity”; “Private credit could, however, become an important source of funding for AI data centres and AI-related firms.”; “If exposures grew rapidly and expected AI-related cash flows disappointed, private credit could become a more material source of credit risk and a potential amplifier of stress for euro area financial institutions.”). In the Sources
- Financial Stability Board, Report on Vulnerabilities in Private Credit, 6 May 2026 (Box 4, “Private credit and funding of recent AI-related investments,” pp. 32 and 33: “While exposure to AI-related sectors remains relatively small for the average private credit fund, interest and activity in this area have been steadily growing over time”; “A sharp correction in asset valuations, which have increased rapidly, could lead to sizeable credit losses to private credit investors. This could be triggered by any significant shortfall in the supply of electricity, a critical factor in the construction and operation of data centres, which could lead to delays or cancellations of projects.”; overcapacity in the data centre market named as a second driver; the box’s $2.9 trillion and $800 billion are Morgan Stanley’s and the Bank of England’s estimates, and its 34 percent share of 2025 deals the OECD’s, which the Board relays). In the Sources
- Fitch Ratings, “US Private Credit Default Rate Reaches New High in 2Q26,” 30 July 2026, with Fitch’s monthly private-credit default commentary of mid-September 2026 (the quarterly reading, 6.0% for the trailing twelve months ended 2Q26, up from the prior record of 5.7% in 1Q26; the monthly reading that supersedes it, 6.3% for the twelve months to August 2026, published in mid-September 2026; Reuters, “Private credit roundup,” 31 July 2026; the two monthly readings were read on Fitch’s own research listing on 21 September 2026). In the Sources
Related terms
From the glossary of The AI Compute Race.
How to cite this page
Dryburgh, Lee S. “Private credit.” In The AI Compute Race. DRYBURGH. https://dryburgh.com/vol1/glossary/private-credit (accessed 2026-11-01).
BibTeX
@misc{dryburgh-private-credit-2026,
author = {Dryburgh, Lee S.},
title = {{Private credit}},
howpublished = {In \emph{The AI Compute Race}, DRYBURGH},
year = {2026},
url = {https://dryburgh.com/vol1/glossary/private-credit},
note = {Accessed 2026-11-01}
}