8 August 2026
Executive Summary
The rapid expansion of private credit is coming under greater scrutiny as investors, regulators and fund managers confront an important structural question: how liquid are investments that are fundamentally built around illiquid loans?
Several major private-credit vehicles have experienced increased investor redemption requests during 2026, while disagreements over the valuation of privately held loans have complicated proposed fund restructurings.
Apollo Debt Solutions disclosed earlier this year that investors had requested the repurchase of approximately 16.8% of outstanding shares, although the fund limited quarterly repurchases to its stated 5% level. More recent indications suggest redemption pressure has moderated.
Separately, Ares Management reportedly reduced the size of a planned European private-credit continuation vehicle from around €1 billion to approximately €400 million after prospective investors sought a larger discount on the underlying loans.
The Federal Reserve is also preparing a pilot survey of the estimated $1.3 trillion US private-credit market, reflecting growing regulatory interest in an asset class that increasingly finances companies outside traditional banking channels.
UK Impact
Private credit has become an important source of funding for UK and European:
- Mid-market companies.
- Private-equity acquisitions.
- Leveraged transactions.
- Property and infrastructure projects.
- Refinancings.
- Businesses unable or unwilling to borrow through traditional banks.
The risk for borrowers is not necessarily that private-credit funding disappears.
Instead, pressure on investors or fund liquidity could result in:
- Tougher refinancing terms.
- Higher pricing.
- Reduced willingness to extend maturities.
- More aggressive covenant enforcement.
- Greater scrutiny of company valuations.
- Lower appetite for weaker sectors or highly leveraged borrowers.
Businesses may therefore discover that a lender which previously appeared highly flexible becomes significantly more conservative when its own investors are demanding liquidity.
Global Impact
Private credit has grown partly because investors were attracted by higher yields and the ability of lenders to negotiate directly with borrowers.
However, the underlying loans are not normally traded in deep public markets.
That creates a potential mismatch: investors may expect periodic access to their money while the fund itself holds assets that cannot necessarily be sold quickly without accepting a discount.
Apollo’s own regulatory filings make clear that its shares are not traded on an established market and that repurchase opportunities operate within defined limits.
The issue also raises questions about valuation.
Where loans rarely trade, their reported value depends upon models, comparable transactions and management judgement. During stressed conditions, the price another investor is prepared to pay may differ materially from the value carried within a fund.
Our View
Borrowers should assess the resilience of their lender as carefully as lenders assess the resilience of their borrower.
Companies using private credit should:
- Understand how the lender funds itself.
- Identify whether the loan sits within an evergreen or fixed-life fund.
- Check when the lender may face investor redemption windows.
- Avoid leaving refinancing discussions until shortly before maturity.
- Maintain relationships with alternative banks and credit providers.
- Review covenant headroom regularly.
- Stress-test the business against materially higher refinancing costs.
- Understand whether loans may be transferred to another fund or lender.
- Monitor changes in the lender’s own liquidity position and investment strategy.
Private credit remains an important financing tool. The risk arises when a company assumes committed capital automatically means unlimited future liquidity.
Risk Indicator: ELEVATED
Disclaimer
The information contained within these Market Alerts is provided for general market awareness and informational purposes only. It does not constitute financial, legal, investment, regulatory or insurance advice. Whilst every effort has been made to ensure accuracy at the time of publication using multiple reputable and independently verified sources, geopolitical events, legislation, regulation and market conditions may change rapidly. Readers should obtain appropriate professional advice before acting upon any information contained herein.
Invictus Risk Solutions LLP – Helping organisations stay ahead of emerging risks through informed insight and independent analysis.