Private Credit Markets Theory, Evidence, and Emerging Frontiers
Abstract
Private credit assets under management grew from $158 billion in 2010 to nearly $2 trillion globally by mid-2024, fundamentally reshaping corporate credit markets. This paper provides a systematic survey of the academic literature on private credit, organizing theory and evidence around four questions: why the market has grown so rapidly, how direct lender technology differs from bank lending, what risk-adjusted returns investors earn, and whether the sector poses systemic risks. We develop an integrated theoretical framework linking delegated monitoring, soft-information processing, and incomplete contracting to the institutional specifics of modern direct lending. The empirical evidence documents a distinctive lending technology serving opaque, private-equity-sponsored borrowers at a meaningful and persistent spread premium over the broadly syndicated loan market, while performance evidence suggests that risk-adjusted returns for the average fund are largely consumed by fees.
Keywords
Cite
@article{arxiv.2603.14491,
title = {Private Credit Markets Theory, Evidence, and Emerging Frontiers},
author = {Jiacheng Zou},
journal= {arXiv preprint arXiv:2603.14491},
year = {2026}
}