JP Morgan cuts lending to private credit firms

A recent string of high-profile bankruptcies have prompted investors to pull more than $4.5bn from leading funds, writes Barney Macintyre

- Barney Macintyre

JP Morgan, the world's largest bank, has restricted lending to private credit firms after marking down the value of its loans to software companies.

It's a significant sign of distrust at a time of heightened volatility in global markets. Since the 2008 crisis, after which banks tightened lending criteria, private credit has grown fivefold into a $1.9tn market.

Private credit is when investors lend money directly to businesses -cutting out the bank as the middleman - in exchange for regular interest payments and higher returns.

In the last decade, it has boomed. But a string of high-profile bankruptcies has led investors to question whether private credit loans are worth less than advertised on the tin. That, in turn, has led them to try to pull more than $4.5bn in cash from leading private credit funds in the last month.

Several managers, including Blackstone, BlackRock and Blue Owl, have set redemption limits in response, "gating" what can be withdrawn at one time. JP Morgan has fired a shot across the bow of an industry trying to muscle in on banks' home turf of lending. But is this the start of a private credit downturn?