SEC chair downplays systemic risk from private credit

The head of the US Securities and Exchange Commission has said private credit does not pose a systemic risk to the financial system, while defending efforts to broaden retail access to the asset class despite concerns over liquidity and investor protections, according to a report by the Financial Times.

SEC Chair Paul Atkins argued that investors who are uncomfortable with potential losses should avoid the sector, describing private credit as an inherently higher-risk market that requires a long-term mindset.

Speaking at the IMF spring meetings in Washington, Atkins said he had personally invested in private credit and had experienced both positive and negative outcomes. He emphasised that losses are an unavoidable part of investing and should be fully understood by participants.

“If you cannot take the heat, get out of the kitchen,” he said, while highlighting the role of private credit in providing financing to companies that have increasingly moved away from traditional bank lending.

His comments come as US regulators consider easing rules to allow greater exposure to private credit, leveraged buyouts and other alternative assets within retirement plans. A recent proposal from the US Department of Labor aims to reduce legal risks for plan sponsors, potentially opening the door for more inclusion of illiquid strategies in 401(k) portfolios.

The push has drawn criticism from some market participants, who argue that private credit’s relatively illiquid structure makes it unsuitable for retail investors who may expect easy access to their savings. Concerns have intensified amid rising redemption pressures across the industry, with investors seeking to withdraw tens of billions of dollars from private credit funds in recent months, while managers have restricted payouts to manage liquidity.

At the same time, financial authorities are increasingly scrutinising the rapid growth of the asset class. The Bank of England has warned that liquidity mismatches, opacity and complexity in private markets could pose vulnerabilities to the wider financial system, while other regulators and rating agencies have raised questions about underwriting standards as the market expands.

Despite these concerns, industry figures argue that redemption limits and structural controls reflect the design of private credit funds rather than systemic fragility, with proponents maintaining that the asset class continues to play a key role in financing non-bank borrowers.