Private credit has transformed into one of Wall Street's hottest markets — and some of its biggest names are starting to worry about what's beneath the surface. Former Goldman Sachs CEO Lloyd Blankfein, JPMorgan Chase Chief Jamie Dimon and Marathon Asset Management Founder Bruce Richards have all warned that the surging sector may be growing riskier as investors chase returns deep into the credit cycle.
Dimon told The Wall Street Journal that private credit and leveraged lending together have swelled to as much as $1.7 trillion, a figure he said isn't likely to cause "systemic" harm but large enough to raise concerns. Richards, speaking with Bloomberg, believes the industry is particularly exposed to the tech sector, where he said defaults could reach 15%.
Blankfein, in an interview with Bloomberg's David Gura, said his main concern lies in the market's lack of transparency.
"One has to worry about opaque assets where there's illiquidity," he said, explaining that such holdings are hard to "mark to market" because comparable data points are scarce — or, as he put it, there is no "precision."
He noted that true valuations often remain untested until an asset is sold — an uncommon event in a thinly traded market.
"The only way to really test it is to sell some, and it's very hard to sell to a knowledgeable buyer," Blankfein said. "Who's going to do the credit analysis to buy a little smidgen, a little piece of something?"
Blankfein also cautioned that sustained market strength can dull investor vigilance. "The markets have been very good for a very long time," he said. "The one thing that imposes a lot of discipline on people are problems and losses and disasters."
With years of easy conditions behind them, he warned, investors may have "lost discipline over time," leaving the market more vulnerable when the cycle inevitably turns.
Reflecting on history, Blankfein said financial crises tend to surface about every decade or so, often with overlapping triggers.
"I don't know if we're at the absolute end of the cycle, but we're getting close," he said, predicting a period of "reckoning." For now, he remains "especially cautious," not only because of broader economic signals but simply because of the long calm itself.
"Undoubtedly, we've put money in places where write-offs are going to need to happen," he said, "and when you're dealing with opaque, illiquid assets like credit, that's clearly a place to look."
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