Key Takeaways
- • Fitch Ratings reported in March 2026 that the default rate among U.S. corporate private credit borrowers hit a record 9.2 percent, per the Center for American Progress article.
- • More than 80 million U.S. workers saved for retirement through employer plans in 2025, with U.S. pension plans allocating more than $47 billion to private credit that year.
- • The largest U.S. life insurers hold $352 billion, or 44 percent, of the industry's $807 billion in private credit fund investments, most of which are illiquid.
- • Apollo-owned insurer Athene holds $387 billion in investments, with 73 percent originated by Apollo, illustrating private equity ownership linkages to insurers.
- • The Department of Labor's proposed rule would provide a safe harbor for advisers offering private investments in 401(k) plans; the DOL received more than 46,000 comments and no final rule had been issued as of the article.
Summary
A Center for American Progress article, the second in a three-part series, examines risks that private credit funds pose to retirement savers, insurance policyholders, and the broader financial system. It notes that Fitch Ratings reported in March 2026 a record 9.2 percent default rate among U.S. corporate private credit borrowers. While nontraded and publicly traded business development companies (BDCs) can accept retail capital, other private credit funds are generally limited to insurers, pensions, endowments, and high-net-worth investors, yet their risks can still transmit to ordinary Americans and the financial system.
On retirement plans, the article reports that in 2025 more than 80 million U.S. workers saved through employer plans, roughly 26 million in pensions and over 65 million in 401(k)s and similar plans. Pension allocations to alternative assets, including private credit, rose from 14 percent in 2001 to 39 percent in 2021, and U.S. pensions allocated more than $47 billion to private credit in 2025. The article argues that 401(k) managers have avoided offering private market options due to fiduciary liability concerns, and that private credit funds, including all BDCs, carry often opaque fees that are substantially higher than those of public mutual funds and ETFs, which can materially reduce reported returns.
The article criticizes a Department of Labor proposed rule from March that would create a safe harbor shielding fiduciaries from liability when they offer private investments, including private credit, in 401(k) plans. The DOL received more than 46,000 comments, many from consumer groups, think tanks, and academics, opposing the proposal. The comment period closed June 1, and according to the article no final rule had been released. The article also cites the SEC's Regulation D from 1982, which permits unlimited capital raising from accredited investors, a category that includes pension and 401(k) plan managers but not the workers whose savings they manage.
For insurers, the article cites National Association of Insurance Commissioners data showing private credit makes up 13 percent of cash and invested assets and 21 percent of bond holdings of U.S. insurers. Moody's Ratings expects continued growth in these investments, flagging valuation and default risk, concentration risk, and liquidity constraints should policyholder payouts spike suddenly. The article highlights private equity ownership of insurers, such as Apollo's Athene, and cites a Columbia Business School study finding that insurers increasingly rely on private letter ratings from smaller agencies, which are less subject to market discipline and are more likely to become impaired. MIT's Robert Pozen concludes that state regulators should not base private credit capital requirements on private ratings.
On retirement plans, the article reports that in 2025 more than 80 million U.S. workers saved through employer plans, roughly 26 million in pensions and over 65 million in 401(k)s and similar plans. Pension allocations to alternative assets, including private credit, rose from 14 percent in 2001 to 39 percent in 2021, and U.S. pensions allocated more than $47 billion to private credit in 2025. The article argues that 401(k) managers have avoided offering private market options due to fiduciary liability concerns, and that private credit funds, including all BDCs, carry often opaque fees that are substantially higher than those of public mutual funds and ETFs, which can materially reduce reported returns.
The article criticizes a Department of Labor proposed rule from March that would create a safe harbor shielding fiduciaries from liability when they offer private investments, including private credit, in 401(k) plans. The DOL received more than 46,000 comments, many from consumer groups, think tanks, and academics, opposing the proposal. The comment period closed June 1, and according to the article no final rule had been released. The article also cites the SEC's Regulation D from 1982, which permits unlimited capital raising from accredited investors, a category that includes pension and 401(k) plan managers but not the workers whose savings they manage.
For insurers, the article cites National Association of Insurance Commissioners data showing private credit makes up 13 percent of cash and invested assets and 21 percent of bond holdings of U.S. insurers. Moody's Ratings expects continued growth in these investments, flagging valuation and default risk, concentration risk, and liquidity constraints should policyholder payouts spike suddenly. The article highlights private equity ownership of insurers, such as Apollo's Athene, and cites a Columbia Business School study finding that insurers increasingly rely on private letter ratings from smaller agencies, which are less subject to market discipline and are more likely to become impaired. MIT's Robert Pozen concludes that state regulators should not base private credit capital requirements on private ratings.
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