Private credit risk is not in the headline yield: five due-diligence questions for family capital

Private credit can offer attractive structures and income, but infrequent pricing, limited liquidity and complex financing links require investors to assess risk differently from public bonds.

01

Transparency remains limited after rapid growth

The Financial Stability Board estimates that private-credit assets in the jurisdictions covered by its assessment stood at approximately US$1.5–2 trillion at the end of 2024. This is an estimated range, not a complete global total, and itself reflects data gaps. The FSB’s concern extends beyond one product to borrower quality, valuation, leverage, concentration, liquidity mismatch and links between funds, banks, insurers and private equity.

02

Decompose the yield before comparing it

A direct comparison with public bonds can overlook compensation for illiquidity, structural complexity, weaker credit and leverage. A fuller assessment separates base rate, credit spread, illiquidity premium and structural effects, then examines seniority, collateral, covenants and intervention rights. Only by identifying the risk producing the return can an investor judge whether the compensation is adequate.

03

A smooth NAV is not the same as stable economic value

Private loans do not usually trade daily and valuations may update slowly. Low reported volatility can reflect pricing frequency and model methodology rather than an absence of deterioration. Investors should understand who values the assets, which comparables are used, whether a third party challenges the result and whether fees create valuation conflicts. Where market verification is scarce, governance is part of valuation quality.

04

Assess liquidity alongside the maturity of the loans

Closed-end funds, evergreen funds, secondary interests and periodic-redemption vehicles cannot be compared under a single label. Notice periods, gates, suspensions, queues, in-kind distributions and fund-level financing should be tested under stress. The FSB also notes that the market at its present scale and structure has not yet experienced a severe, sustained downturn. Limited redemption pressure in the past does not prove future liquidity.

05

Perform due diligence across the family balance sheet

A family may hold similar borrower, sector or refinancing exposure through private-credit funds, insurance products, private-bank borrowing, operating-company equity and financial stocks. A diversified fund can still create concentration after aggregation. At minimum, the family should ask what risk the yield compensates, whether borrowers withstand stress, whether valuation can be independently challenged, whether liquidity promises match the assets and whether exposures are duplicated across the balance sheet.

資料

官方資料來源

1. Financial Stability Board | Report on Vulnerabilities in Private Credit (2026-05-06)
2. Financial Stability Board | FSB warns on private credit vulnerabilities (2026-05-06)

以上官方資料均於2026年8月5日查閱。法規、政策及市場資料可能其後更新。