Private Credit’s $1.7 Trillion Dilemma
- Unity Investments
- Jun 4, 2025
- 1 min read
Moody’s recent warning about rising systemic risk in private credit—driven by surging retail inflows—touches on something fundamental: the tension between access and prudence.
Private credit is no longer a niche. It is now a US$1.7 trillion asset class. As more capital floods in, some may argue that underwriting standards will fall. Structures will loosen. Protections will weaken.
And this is precisely where discipline matters most.
We often talk about what we target: seniority, collateral, stable cash flow. The harder conversations are about what we turndown:
Deals where cash flow visibility depends on macroeconomic conditions
Sponsors with good stories but little skin in the game
Jurisdictions where legal recovery is technically possible but practically improbable (which is why we are currently focused on the U.S. market)
Structures where covenants are marketing points, not control mechanisms (details regarding how tight the covenants are rarely make it to investors)
Restraint is not passive. It is an active decision to balance yield today and durability tomorrow. Through scenario modeling that tests and retests assumptions, through legal documentation that prioritizes enforceability, and through the humility to recognize that not every deal—however well-priced—is worth holding through a cycle, we build true prudence.
We cannot predict every default, but we do try to ensure that when they happen, we are structurally positioned to recover both principal and interest through proper collateralization, legal documentation and strict enforcement.
Because private credit, at its core, is about building a durable portfolio of asset-backed loans that survives real-world risk scenario, thus, allowing the magic of compounding to work over time.
