Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Hedge fund billionaire Ken Griffin has questioned whether wealthy individuals truly understand the risks of investing in private credit and warned that they might struggle to access their money in the event of a downturn.
Griffin, founder of $67bn hedge fund Citadel and trading firm Citadel Securities, is the latest high-profile financier to weigh in on the fate of the private credit industry, which has been hit by investor redemptions and fears over bad loans.
The sector — typically comprising investment funds that make direct loans to private equity-owned companies — has exploded in popularity over the past decade as many banks retrenched their commercial lending businesses due to stricter regulations.
As a result, the private credit industry’s assets have surged to more than $3.5tn, according to the Alternative Investment Management Association, with funds targeting wealthy investors emerging as one of the fastest-growing areas of the asset management sector.
“The real issue here is the liquidity mismatch between the retail investor and the duration of the investments,” Griffin said in an interview with the FT.
“We live in a world where retail investors have become accustomed to having immediate liquidity for their investments . . . investing in private credit is a different story.”
Some of the world’s largest alternative investment firms — including Blackstone, Apollo Global Management, KKR and Ares Management — have in recent years expanded beyond their traditional institutional client bases by launching funds aimed at wealthy investors.
The prospect of higher returns in exchange for limited liquidity has lured hundreds of billions of dollars from well-off individuals to “semi-liquid” private credit funds, which, unlike traditional mutual funds, only offer investors the ability to pull some of their money out periodically.
“Retail was viewed as a phenomenal channel from which to raise assets,” said Griffin. “But did the retail investors really understand the nature of the investment they were making?”
Some cracks are beginning to emerge in the private credit industry. Blue Owl Capital, a private credit investment firm that aggressively tapped retail investors, has limited withdrawals from its two flagship funds amid billions of dollars of redemption requests and concerns over its exposure to software companies that are vulnerable to AI disruption.
Wealthy investors sought to pull more than $20bn from private credit funds in the first quarter of 2025, according to Financial Times calculations, of which just over half was permitted by often strict withdrawal rules.
JPMorgan Chase boss Jamie Dimon warned in his annual letter to shareholders earlier this month that losses for lenders to highly indebted companies will be higher than many expect because of weaker lending standards.
Speaking on Tuesday at Norges Bank Investment Management’s conference in Oslo, Dimon pointed to the more than 1,000 private credit firms and said that they may experience mixed fortunes when the cycle turns.
Some firms “may be brilliant, but I guarantee you not all 1,000 of them are”, he said. “So in my view, because of that and the underwriting standards, we haven’t had a credit recession in so long, so when we have one it will be worse than people think.”
While views on the outlook for defaults in private credit vary, a number of financiers have suggested that some private capital firms had veered close to mis-selling in the hunt for money from retail investors.
“Not everybody has marketed their product as clearly as, certainly we would like to see, with the clarity that this is really not a liquid product,” Goldman Sachs president John Waldron said at a Semafor event in Washington earlier this month.
“Those retail investors, I think, have the perception of more liquidity than is the reality.”
