Frequent warnings do little to stop the influx of hot money! Under the theory of "praying mantis," private credit giants attract more than 100 billion yuan.

Despite increasing warnings against the relaxation of loan approval standards, weakening risk assessments, and rising borrower pressures, demand for private credit from investors continues unabated. In September last year, highly leveraged automotive parts manufacturer First Brands Group ran into trouble, becoming a focal point for critics of private credit, revealing the accumulation of aggressive debt structures under years of loose financing conditions. This event intensified concerns in the market about the widespread risks that may be lurking, prompting Jamie Dimon, CEO of JPMorgan Chase, to warn that the risks of private credit "are hidden in plain sight" and to caution that once the economic conditions deteriorate, "cockroaches" are likely to emerge one after another. Ray Dalio, founder of Bridgewater Associates, also warned that rising interest rates in the broader private credit market are squeezing leveraged assets, increasing the pressures on venture investments and the private credit market. Despite reports that private credit investors withdrew over $7 billion from Wall Street giants like Apollo, Ares, and Blackstone in the last few months of last year, funds continue to flow into private credit funds. Just last week, KKR announced that it had completed the fundraising for its second Asian credit opportunity fund, with a size of $2.5 billion. Industry giant TPG raised over $6 billion for its third flagship credit solutions fund in December, far exceeding the $4.5 billion target, and doubling compared to the previous fund. In November last year, LBO announced that its fifth flagship private credit fund had completed final fundraising, reaching $7.3 billion due to strong demand from global institutional investors, exceeding the initial target. In December last year, Granite Asia announced that its first pan-Asian private credit strategy fund completed its initial closing, raising over $350 million and receiving support from Temasek, Khazanah Nasional, and the Indonesia Investment Authority, highlighting strong investor demand in the region. The initial closing refers to the fund accepting initial investor commitments and starting investments, while fundraising is still ongoing. Why are investors continuing to return? Despite Dimon's past warnings about private credit, JPMorgan Chase appears to have reassessed the market. In its "Alternative Investments Outlook for 2026", JPMorgan Chase pointed out that while underwriting standards in the market have loosened somewhat, the demand for private credit is still supported by structural forces, including the ongoing financing needs of medium-sized enterprises, infrastructure developers, and asset-backed borrowers. Goldman Sachs noted that private credit has grown into a market worth trillions of dollars, becoming a core allocation for many institutional investors. Pension funds, insurance companies, and endowments, which once saw this asset class as a niche alternative, now view it as a long-term part of their investment portfolios. The bank stated, "In September 2025, concerns about a potential bubble in private credit reappeared when a few U.S. borrowers, especially in the auto industry, defaulted on large amounts of debt." JPMorgan Chase added, "While these default events have raised alarms among investors and other relevant parties outside the U.S., they appear to be issuer-specific issues rather than systemic risks." and pointed out that the demand for returns continues to exceed supply, especially in the private equity transaction area. Industry experts in private credit also believe that there are structural factors in the market. As traditional banks have tightened lending due to regulatory restrictions since the 2008 global financial crisis, including higher capital requirements and stricter risk weighting rules, the cost of holding high-risk corporate loans has increased, leading many banks to retreat from leverage or custom financing, creating space for private credit companies to fill the gap. This dynamic reinforces the market perception that private credit is no longer a niche strategy but a core part of the financial system. Signs of pressure cannot be ignored Despite strong fundraising, pressure signals are becoming increasingly difficult to ignore. Goldman Sachs warned that high interest rates are pushing up borrowing costs, making it increasingly difficult for companies to repay their private credit debts in full. The bank's data shows that about 15% of borrowers are unable to generate enough cash to fully pay interest, and many other companies have very little margin for error in their operations. The bank noted that while rate cuts may provide some relief, they can only slightly alleviate the pressure and cannot address fundamental weaknesses. Morningstar also warned that the impact of high interest rates, especially compared to the ultra-low interest rate levels from 2010 to 2021, penetrating balance sheets may deteriorate the credit conditions of high and low-quality borrowers by 2026. However, the issues of leverage and borrower pressure are not evenly distributed across all markets, with significant differences between the U.S., Europe, and Asia markets, according to industry executives. Ming Eng, Managing Director of Granite Asia, stated that the saturation level of the private credit market in Asia is much lower than in Europe and the U.S. "We have not seen the same type of leverage or weakening of protective terms in the U.S. market that is of concern," she explained. "The Asian market is at a very different stage of development." She further explained that intense competition in the European and American private credit markets has led to loose structures and high leverage, while the Asian market is still relatively in its early stages of development. Many borrowers are still founder-led or family businesses, heavily reliant on bank or equity financing, providing room for growth in private credit. "Most transactions we see in Asia are still very conservative," Eng said. "Lower leverage, stronger protective terms, and usually real operational background support behind the funds, rather than financial engineering." As concerns about underwriting quality in developed markets continue to grow, these differences become increasingly important.