Private Credit Funds With No Skin in Game a Worry: Credit Weekly
- Supervisors concerned by risks from $2.1 trillion industry
- About 78% of US private credit deals are with PE-owned firms
Watchdogs are concerned about the “substantial” risk to investors in the private credit market after it emerged that almost 40% of funds don’t have skin in the game.
The decision by so many managers to avoid putting their own capital into the vehicles creates an “incentive misalignment,” the Bank of International Settlements said this week. The risk is that industry players could prioritize their profit over investors’ returns.