Fifteen years ago, a company in need of money knocked on a bank's door. Today, it is increasingly likely to end up at a fund manager's instead. That shift, quiet but significant, is the story of private credit: money lent to companies that never touches a bank's balance sheet.

The mechanism unfolds in three steps. First comes the fundraising: institutional investors, insurers, pension funds, family offices, commit money to a private debt fund, typically for ten years, with no way out before maturity. Second comes the lending itself. The fund lends directly to companies, usually mid-sized ones that private equity firms have bought and loaded with debt, too indebted or too opaque to interest a traditional bank. Third comes the return. The investor earns a richer interest rate than a listed bond would pay, which is only fair: they are taking on more risk, and forgoing liquidity altogether.

That illiquidity is precisely what explains private credit's rise since 2009. New capital rules made risky loans costlier for banks to hold, so banks retreated, and someone had to step into the gap.

So where does the risk hide? Lending to companies is hardly novel. The risk hides in how these loans are priced. A listed bond has a market value every day, set by thousands of buyers and sellers. A private loan, by contrast, is valued by the fund manager once a quarter. That means a private credit portfolio can look serenely stable for months, even as an equivalent listed bond would already have moved.

Private credit is no exotic curiosity reserved for a handful of insiders. It has become a structural part of how the real economy gets financed, data centres, technology firms, buyout deals, and it remains largely invisible precisely because it passes through neither a bank nor a stock exchange. To understand how it works is to understand where a meaningful slice of today's risk now resides, just out of view.

This year has already produced two cautionary tales. First Brands Group, an auto parts supplier backed by billions in private loans, collapsed in January after it emerged that roughly USD 2.3 billion of the receivables it had pledged as collateral were fabricated. A few weeks later, Blue Owl, one of the largest private credit managers, froze withdrawals from one of its retail funds after investors tried to leave faster than the fund could sell anything to pay them. Neither episode means private credit as an asset class is broken. But both are a reminder that even a market built on patience and trust is not immune to isolated risks.