The global private credit market will continue to grow in scale and complexity in 2026, having become much more diversified and widely held over the past decade, with an evolution into new structures, sectors and products, Fitch Ratings says.

Private credit structures and asset classes will continue to evolve beyond closed-end investment funds and business development companies, which are expected to reach $2.3 trillion in assets under management at end-2025, according to Preqin.

Private credit’s role in asset-based finance, including infrastructure and special situations is expected to increase, along with continued growth in semi-liquid and perpetual structures. Private credit managers are now also regularly involved in investment-grade corporate and structured finance lending, driven by their increased affiliations with insurers.

Fitch does not currently view the risks associated with private credit as systemic, despite various “bubble-like” attributes, including rapid growth, tight spreads, increased competition and growing retail participation. Liquidity transformation risks are limited, as private credit is typically extended by permanent capital vehicles or closed-end investment funds, while redemption rates in semi-liquid funds should remain below caps.

That said, in the event of a broader economic stress, private credit could be a meaningful risk transmission channel across various parts of the financial system, given its expanding connections to the wider capital markets and traditional lenders. Insurers have increased exposure to private credit through tie-ups with alternative investment managers, and banks provide various forms of leverage to the private credit sector, including warehouse lines, revolving lines of credit and fund finance facilities.

Private credit performance remains a key focus for Fitch in 2026. Interest rate cuts will support borrower creditworthiness by providing liquidity relief as a result of improving free cash flow. This should reduce defaults given borrower sensitivity to high rates from largely floating-rate capital structures and limited use of interest rate hedges.