Securities and Exchange Commission Chairman Gary Gensler said the growth of private credit in recent years means it is a space that “definitely has some risk” and “deserves … to have some attention” from the securities industry regulator.
Speaking at the Bloomberg Global Regulatory Forum in New York on October 22, Gensler said the private credit market has grown to as much as $1.7T or larger, with much of the current activity taking place in the leveraged loan marketplace. And while he acknowledged that “direct lending is not new,” referencing the fact that when he started at Goldman Sachs 45 years ago there was a department working on structured finance and private loans and credit, “it’s grown a lot in the last five years,” he said.
As such, Gensler said it’s an area that deserves some attention, especially when it comes to resilience in the face of a downturn. “Some questions might be, like, is there anything here about regulatory arbitrage? What about the interconnections to banks and insurance companies?” he asked. “What's going on in private letter ratings in this field, and are there risks? And importantly, it hasn't lived through – at this size and scale – it hasn't lived through a downturn. So is it … shock tested in the next downturn?”
At the same time, Gensler cautioned that he and the SEC are believers in the value of private market funds. “I think we benefit from $30T of assets in private funds. I think a lot of folks around the globe would love to have the vitality we have in our venture capital field and so forth,” he said. “But it doesn’t mean it’s without risk,” he added, citing the famous collapse of Long Term Capital Management as evidence of the potential ramifications for markets when a private fund fails.
Source: https://www.bloomberg.com/news/videos/2024-10-22/sec-keeps-close-eye-on-private-credit-gensler-says-video
For more public pension insights and a comprehensive library of public plan minutes, book a demo of Dakota Marketplace! 
