Top Funds Warn of Private Credit Risks in ‘Race to the Bottom’

From global banks to alternative fund managers, more senior financiers are warning of cracks in private credit.

TCW Group Inc.’s Chief Executive Officer Katie Kochtold a forum in Hong Kong on Wednesday that she’s “very nervous” about parts of private credit. Tony Yoseloff, chief investment officer of Davidson Kempner Capital Management LP, said there’s been a “race to the bottom” in terms of covenants.

Their comments come as private credit — or lending done outside the heavily regulated banking sector — has ballooned to a $1.7 trillion industry. Some banks are making conscious decisions to collaborate with ...