Private Credit Is Being Threatened by a Cocktail of Risks

Private credit more than doubled in size from 2019 thanks to interest rate hikes that made its floating-rate debt more attractive to investors. Now, a Federal Reserve interest-rate cut is adding to the headwinds hampering the breakneck growth of the $1.7 trillion industry.

Lower benchmark rates will make fixed income, which locks in returns, more attractive to investors than variable rate. That’s set to become a more pressing issue after the Fed projected further easing later this year.

Regulators also have the industry in their crosshairs after growing concerned about the spillover impact any crisis could have on banks, ...