Private credit has seen significant growth, increasing from approximately $250 billion following the global financial crisis to an estimated $2.6 trillion, as indicated by research from the CFA Institute. This expansion has been largely driven by funds aimed at individual investors, particularly through business development companies (BDCs), which must disclose their loan holdings and values in quarterly filings with the U.S. Securities and Exchange Commission (SEC).
BDCs can be listed on exchanges or operate as non-traded entities. Listed BDCs offer a wealth of information due to their requirement to report publicly, while non-traded BDCs are valued based on net asset value (NAV) determined by the fund manager. Although there is increasing retail access to these financial products, a significant challenge remains: the lack of transparency surrounding loan pricing. For the fastest-growing segment of the market, only loan-level filings provide insight into portfolio construction.
The numbers reveal notable growth among BDCs consistently filing with the SEC. Non-traded BDCs saw their net assets rise from $32 billion in early 2023 to $116 billion by the end of 2025. Listed BDCs also experienced growth, increasing from $42 billion to $55 billion during the same period. The lack of publicly available market prices creates a transparency issue, as investors may have difficulty assessing the value of a non-traded BDC’s portfolio, which is not subjected to market trading. In contrast, any doubts regarding a listed BDC’s loan values result in observable price declines.
Why this story matters
- The rapid growth of private credit reflects increasing investment opportunities for individuals but raises concerns about transparency.
Key takeaway
- Transparency issues in non-traded BDCs may hinder investor confidence and decision-making.
Opposing viewpoint
- Proponents argue that the current valuation methods for non-traded BDCs are sufficient, as they are overseen by boards, ensuring a level of oversight.
