Private credit alarm bells echo 2007 subprime warnings

Strains in private credit are beginning to echo dynamics of U.S. subprime housing that precipitated the 2007-09 Global Financial Crisis. This raises potential systemic risk for credit and banking sectors; portfolio managers should adopt a risk-off stance and closely monitor leverage, liquidity and underwriting quality in private-credit exposures.

Analysis

Strains in private credit are beginning to echo dynamics of U.S. subprime housing that precipitated the 2007-09 Global Financial Crisis. This raises potential systemic risk for credit and banking sectors; portfolio managers should adopt a risk-off stance and closely monitor leverage, liquidity and underwriting quality in private-credit exposures.