The Expansion and Diversification of Private Credit Funds

Yuko Iwamura, Sena Koga, Masahiro Jimbo and Tomoki Higuchi
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Yuko Iwamura: Bank of Japan
Sena Koga: Bank of Japan
Masahiro Jimbo: Bank of Japan
Tomoki Higuchi: Bank of Japan

No 26-E-13, Bank of Japan Review Series from 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.

Date: 2026-09-25
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