Citigroup has warned that inexperienced investors in private credit could exacerbate market stress if they are forced to sell loans during a downturn, adding to growing debate over risks in the rapidly expanding $1.8tn asset class, according to a report by Bloomberg.
Mickey Bhatia, Citi’s head of spread products, said the concern centres on newer entrants to the market who may lack the capability or willingness to manage distressed positions through a cycle. Instead, he suggested, they could opt to sell assets below intrinsic value if conditions deteriorate, potentially amplifying price volatility across corporate debt markets.
Speaking on a Bloomberg Intelligence podcast, Bhatia said such behaviour could have wider implications for liquidity and pricing in private credit, particularly if weaker market participants exit positions en masse during periods of stress.
The comments come amid increased scrutiny of private credit markets, where rapid growth in fundraising and participation has raised questions around underwriting standards, valuation transparency and liquidity risk. The sector now represents an estimated $1.8tn globally, with concerns also centred on exposure to sectors such as software, where artificial intelligence is seen as a potential disruption risk.
Industry attention has intensified following a rise in retail investor redemptions from private credit vehicles and broader debate over how accurately some privately negotiated loans are marked.
Bhatia noted that while these risks exist, he does not expect systemic stress in private credit to spill over into the wider credit markets. He echoed a more cautious but ultimately stable outlook, suggesting that overall corporate fundamentals remain broadly resilient.
His comments align with a broader view from senior banking executives that, despite pockets of stress and liquidity concerns, the market is not currently facing systemic instability.
JPMorgan Chase & Co. chief executive Jamie Dimon has also recently highlighted concerns that weaker managers in the private credit ecosystem may struggle in a downturn, although he stopped short of predicting widespread instability.
