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The Expansion and Diversification of Private Credit Funds

Author

Listed:
  • Yuko Iwamura

    (Bank of Japan)

  • Sena Koga

    (Bank of Japan)

  • Masahiro Jimbo

    (Bank of Japan)

  • Tomoki Higuchi

    (Bank of Japan)

Abstract

The private credit (PC) fund market has been expanding, particularly in the United States. The core strategy of PC funds has typically involved raising long-term capital from institutional investors and providing direct lending, primarily to medium-sized and small companies with lower creditworthiness, under strict credit management. However, in recent years, continued capital inflows have intensified competition among funds engaged in corporate lending, leading some to change their lending conditions. PC funds are diversifying in both asset types and structures; asset-based finance (ABF) funds backed by cash flows from specific assets and semi-liquid funds targeted at retail investors are growing. This suggests a shift in the risk profiles of some PC funds. In Japan, as financial institutions and institutional investors have been strengthening their interconnectedness with PC funds through investment and lending, it is necessary to pay attention to the shifting risk profiles and closely monitor the PC funds' investment practices as well as their credit developments.

Suggested Citation

  • Yuko Iwamura & Sena Koga & Masahiro Jimbo & Tomoki Higuchi, 2026. "The Expansion and Diversification of Private Credit Funds," Bank of Japan Review Series 26-E-13, Bank of Japan.
    • Handle: RePEc:boj:bojrev:rev26e13
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