Researchers at Americans for Financial Reform Education Fund, Global Energy Monitor and Private Equity Stakeholder Project assessed the holdings of 21 private equity firms, overseeing a combined $6tn in assets under management.
Problems are brewing in a scheme that is bigger than the Australian economy and almost completely without federal oversight. It is called private credit — large scale lending, but not by banks — and has surged from less than $300 billion in loans in 2013 to over $2.1 trillion globally today. This unregulated market has become yet another tool for the private equity industry to pursue leveraged buyouts and leaves target companies on the hook to repay the new mountains of debt. If this large pool of unregulated loans go sour, the distress could spread into the broader financial system, including traditional banks, and pose systemic risk to the financial system.