Private credit’s next chapter: Growth, access, and policy shifts

Private credit (or private debt) has grown rapidly in recent years as an alternative to traditional lending, becoming an essential pillar of the private market ecosystem. The rise of private credit is transforming how debt capital is allocated and managed, offering borrowers greater flexibility while providing investors with access to diversification and higher-yield opportunities. As more companies and investors are seeking access to private credit, the policy framework is evolving as well, providing new opportunities amid growing scrutiny.

In this article, we’ll examine:

• The evolution of private credit and the shifting regulatory posture toward the industry 

• How policy and product innovation are expanding access to private credit 

• How continued growth and expansion will impact regulation, fund operations, and how best to navigate those changes

The evolution of private credit

The expansion of the private credit industry accelerated in the wake of the global financial crisis. Post-2008 regulatory reforms, such as Basel III and the Dodd-Frank Act, imposed stricter capital and liquidity requirements on banks and constrained traditional lending activities, particularly in mid-market businesses. This created a structural gap in the credit market that private funds quickly moved in to fill. 

Since then, the private credit market has increased tenfold, with global private credit assets under management projected to exceed $3 trillion before the end of the decade. However, the appeal of private credit lies in its structure, which offers benefits to both borrowers and investors alike. Compared to traditional lending, private credit can provide borrowers with more flexibility through customized terms and faster execution timelines, while investors can benefit from higher yields, lower volatility compared to public debt markets, and stronger structural protections than those found in broadly syndicated loans. Institutional investors—including pension funds, insurance companies, and family offices—have increasingly embraced private credit as a strategic allocation. The industry’s infrastructure has also evolved, with new fund structures, data tools, and servicing technologies emerging to support scalable operations.

The shifting regulatory posture for private credit

The rapid expansion of the private credit industry has also attracted increased attention from policymakers and regulators. Under the previous administration, the growth in non-bank lending came under scrutiny due to concerns regarding transparency, illiquidity, and the absence of comparable oversight to banks. The opacity and interconnectedness with banks and insurance companies led to more data reporting under Form PF and calls for more prudential oversight. The private fund model came under scrutiny as well. Under former SEC Chair Gary Gensler, the SEC attempted to enact a slate of new regulatory compliance and reporting obligations that would have fundamentally changed how private credit funds managed relationships with their LPs, portfolio companies, and vendors, in addition to heightened scrutiny in exams and enforcement sweeps. 

This posture has significantly shifted under the second Trump Administration, where the focus is moving toward expanding access to capital and private market investment opportunities. The SEC under Chairman Paul Atkins has already taken several actions to reverse regulatory scrutiny on private funds, including withdrawing a number of Gensler-era rule proposals that would have added significant compliance obligations for private credit fund managers on areas like cybersecurity risk management, vendor due diligence, custody, and the use of technology and artificial intelligence. The Commission also delayed compliance with new Form PF requirements and is expected to undertake a broader review of Form PF to ensure the information collected meets regulatory objectives. 

But a shift in regulatory posture does not mean a decrease in oversight. The SEC will continue to pursue violations, though the focus may shift toward combating retail investor harm over large-scale compliance sweeps and technical violations. 

Policy efforts to expand private credit access

The most significant shift in private credit policy is retailization. The growth of private credit, and private markets more broadly, has driven a push to democratize and provide greater investor access to these markets. Private markets offer diversification and yield opportunities; however, due to operational and regulatory constraints, access is limited to investors who meet specific wealth or income thresholds. For private credit funds, this bar is often higher. Investor limits, high investment minimums, and limited liquidity mean these opportunities are largely reserved for institutional investors and high-net-worth individuals. Most individuals are limited to investing in the public markets, leaving them with fewer options as private markets continue to grow.

This dynamic is changing, however, as a confluence of product innovations, market conditions, and a shifting regulatory posture is unlocking new pathways for everyday investors to access private credit investment opportunities—and in doing so, potentially trillions more in investment capital for the ecosystem. Carta has been pushing for these policy changes to expand access to this important and growing asset class, while keeping key protections in mind. 

Retail access through registered funds

The SEC is undertaking efforts to enable broader retail access to diversification and growth opportunities in the private markets. For private equity and private credit, retail access is largely being driven by indirect exposure through registered fund vehicles.

Closed-end funds and interval funds

These are investment companies that are registered under the Investment Company Act of 1940 and available to the public. Their structure, professional management, and opportunities for periodic liquidity make them a viable option to expand retail exposure to private equity and private credit. However, longstanding SEC staff guidance prevented closed-end funds from investing more than 15% of their assets under management (AUM) in illiquid assets unless the funds had a $25K investment minimum and were only offered to accredited investors. 

In August 2025 guidance, the SEC formally scrapped its prior position, opening the door for retail capital to access private credit through closed-end funds of private funds, while also stressing the need for important investor protections. 

The recent guidance highlights the need for robust disclosures, including:

• Disclosures related to costs, strategies, and risks associated with private fund investing included the registered fund adviser’s due diligence practices for private fund investments

• Detailed descriptions of the fees charged by both the registered fund and the private fund

• Information regarding the strategies and risks of the underlying private fund investment, noting that investors may receive limited information

• Liquidity terms that are clearly and prominently displayed

ETFs and continuously traded vehicles

Exchange-traded funds (ETFs) focused on private credit are also growing in popularity. ETFs offer more flexibility when it comes to liquidity, but this can also create challenges if there is misalignment between investor expectations and liquidity terms. To prevent potential runs, the SEC requires open-end funds to have a liquidity risk management program and limits illiquid holdings to 15% AUM. Recently, new private credit ETFs have come to market that circumvent this limitation by offering guarantees to backstop liquidity in the event of redemptions.

Retirement

There is growing interest in permitting long-duration private credit exposure within retirement accounts such as 401(k)s. While technically not prohibited under the Employee Retirement Income Security Act (ERISA), plan fiduciaries have avoided offering private market investment options to 401(k) participants despite the potential for higher net risk-adjusted returns due to litigation risk tied to higher fees, liquidity, and transparency concerns. President Trump issued an executive order (EO) directing federal agencies—namely the Department of Labor and the SEC—to clarify fiduciary standards, disclosure expectations, and operational mechanics that would enable managers to responsibly offer exposure to private assets through target-date or professionally managed portfolios. 

Even in advance of the EO and its workstreams, some retirement plan providers have started pursuing opportunities to offer private equity and private credit opportunities to its plan participants. The EO and its resulting policy shifts will open this market even further, creating a major long-term source of sticky capital for private credit firms.

Impact on fund operations

The lines between public and private markets will continue to blur. As retail participation increases, so does the need for clear, consistent disclosures and education around private fund operations. Broad retail access to private credit will necessitate a shift toward increased transparency, which will drive more frequent valuations, faster reporting, and enhanced disclosures regarding risk, duration, and redemption mechanics. 

Cryptocurrency and private credit

In July 2025, SEC Chairman Paul Atkins announced “Project Crypto,” a Commission-wide initiative aimed at establishing clearer classifications for digital assets and enabling tokenization, which Atkins views as the next innovation in financial markets. With regulatory clarity and institutional buy-in, tokenization has the potential to transform the private market sector by lowering barriers for retail access through fractionalized participation and lower minimums. But, it also has the potential to improve operational efficiencies, as smart contracts and blockchain rails can streamline fund administration, compliance, and liquidity. 

We’re still in the early days, but several private credit funds have launched tokenized projects. A more accommodative regulatory posture could enable more crypto infrastructure to come online. Despite efforts to streamline tokenized operations, these assets will likely remain subject to traditional securities laws that apply to the underlying assets: Being on-chain doesn’t change the substance of the underlying asset.

Systemic risk and regulatory oversight in private credit

Private credit has grown in systemic importance as it takes on a larger role in corporate finance and becomes increasingly interconnected with the financial ecosystem. Despite positive regulatory headwinds, scrutiny of the industry remains. Immediate risks from private credit vehicles appear limited due to their moderate use of leverage and long-term capital lockups, but valuation opacity, limited disclosures, and a fragmented regulatory regime make it difficult to monitor risk across fund complexes. 

Financial interconnectedness and systemic risk

While private funds have taken on the role of traditional mid-market lending, private credit is increasingly funded by banks, thereby indirectly exposing the traditional banking system to private credit risk. Insurers are also increasing their participation in the private credit markets to access yield and portfolio diversification. PE firms have pursued acquisitions or partnerships with insurance companies, providing the asset manager with access to long-term permanent capital, which aligns with the long-term investment strategies of life insurers. 

Policymakers like Sen. Elizabeth Warren are pushing regulators to assess the systemic footprint of private credit, highlighting the growing ties to banks and insurance companies. State insurance regulators are also pushing to clamp down on ratings arbitrage and affiliated fund risk. The National Association of Insurance Commissioners (NAIC) adopted guidelines that are scheduled to take effect in 2026, allowing regulators to challenge credit ratings that appear inflated or conflicted. The NAIC is also considering limits or enhanced disclosures around related-party transactions and ownership structures. 

Liquidity mismatch and market stress

Economists have warned that today’s distributed network may enhance efficiency in normal times, but could act as a shock amplifier in times of stress. Expansion into retail and associated liquidity features could also create fragility. Many funds offer quarterly or annual redemptions, but the underlying loans are often illiquid and bespoke. In downturns, redemption pressures could lead to fire sales.

Political risk

Private fund lifecycles are longer than political terms, so regulatory posture could shift back depending on future election outcomes.

Regulatory oversight

With the growth of private credit and broader access, operational complexity is increasing and regulatory oversight is evolving. While the overall regulatory posture is expected to be more favorable to private funds, we anticipate that regulators will continue to exercise robust oversight, particularly as it pertains to the expansion of retail investments.

The expansion of private credit to retail investors will put more pressure on regulators to effectively oversee these markets. As more traditional buyout firms launch credit strategies, there is a potential for misalignment and conflict. Private credit assets are also widely held, including by investors subject to public reporting, so it will be important for private fund managers to ensure their valuation policies are documented and effectively applied. The SEC has highlighted the importance of fund disclosures around conflicts, fees, strategy, and liquidity, which will likely remain a focus in exam priorities.

Technology will be key to both enabling operational scale and increasing transparency. 

How Carta can help navigate the shifting environment in private credit

The convergence of public and private markets is reshaping the investment landscape, opening new avenues for capital deployment and risk diversification. This transformation is unfolding alongside a policy environment that has evolved—often in direct response to policies Carta is driving—to be more favorable toward the private credit ecosystem, creating new opportunities to expand access to a broader pool of investors and drive trillions of new capital into the market. As the market continues to evolve, proactive and informed policy will be critical to helping funds navigate emerging complexities and anticipate what’s around the corner. 

Carta and its policy team work to serve as the connective tissue between private capital and policymakers. In doing so, we help drive outcomes that bolster and broaden the ecosystem, while also helping the ecosystem navigate the shifting policy landscape and build the product infrastructure to support them in doing so.