Private credit’s rapid expansion has firmly moved it from the margins of alternative finance into the mainstream of pension scheme portfolios. With more than $2 trillion in AuM and projected to grow to $3.4 trillion by 2030¹, private credit is now an established component of institutional portfolios. Yet, despite its growth, the asset class has not been fully tested through a sustained credit downturn, making strong governance and ongoing oversight critical for investors.
Regulators have been signalling the this for some time. In 2024, the IMF highlighted vulnerabilities across the ecosystem, pointing to concerns around opacity, valuation practices, interconnected counterparties, limited regulatory oversight and the risk of weakening underwriting standards.² This was followed by the Bank of England’s review of private markets, examining how private equity and private credit might behave under severe stress and how risk could propagate across banks, non banks, fund managers and the real economy.³
For trustees, these warnings matter as a practical test of oversight. The question is whether the governance frameworks trustees have in place are sufficiently robust to understand, monitor and challenge the risks being taken on behalf of members. Recent market jitters have brought this into sharper focus. Concerns around covenant lite structures, the growing use of PIK terms and several failures have attracted attention, underlining the consequences of weak underwriting, poor collateral controls and limited transparency.
A key mistake trustees may make is to treat private credit as a homogenous asset class, when it encompasses a wide range of strategies and sectors including senior secured and asset based lending, real estate and infrastructure finance, consumer credit and sponsor led direct lending each carrying very different risks.
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Effective oversight of each sector therefore requires a different approach but one ultimately rooted in a clear understanding of the types of exposures held, the risks associated with those exposures, how they might be mitigated and, crucially, how they would behave under stress.
Rigor rather than retreat
The credit cycle that began in 2010 has been prolonged by years of low interest rates, abundant liquidity and fiscal stimulus. The subsequent tightening of monetary policy has raised financing costs, and pockets of stress are an expected part of that adjustment. Meanwhile, private credit has become deeply embedded within the modern financial system and will continue to serve as an essential channel through which capital is allocated to the real economy. So for institutional investors, including pension trustees, the right response to the recent jitters is rigor, rather than retreat.
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At TPT Investment Management, private credit remains a core strategic allocation within client growth portfolios. Emphasis is placed on disciplined implementation and oversight rather than yield seeking in isolation. This includes ensuring exposures are achieved via well resourced, reputable investment managers with proven capabilities across multiple sectors. Emphasis is placed on differentiated origination, rigorous underwriting of complex collateral, clear sustainability principles and robust contractual protections, alongside demonstrable ability to enforce those protections when required.
Trustees should ensure they regularly engage with managers, scrutinising valuation methodologies, collateral monitoring, concentration risks and downside scenarios. Liquidity terms must be clearly understood and stress tested, recognising that income generation will look very different from capital protection during periods of market stress. The ability of managers to deploy capital selectively, avoid crowded trades and provide certainty of execution in more challenging environments must be actively examined, not assumed. In an environment of heightened scepticism, good governance may be the ultimate differentiator.
¹ PwC: Private credit’s next phase – growth under pressure [May 26, 2026]
² https://www.imf.org/-/media/files/publications/gfsr/2024/april/english/ ch2.pdf
³ https://www.bankofengland.co.uk/news/2025/december/boe-launches-system-wide-exploratory-scenario-exercise-focused-on-private-markets