Abstract
We document new evidence on the capitalization, funding structure, and performance of private credit funds using comprehensive fund-and asset-level data covering most of the industry. Private credit funds are highly capitalized, with equity typically accounting for 65-80% of total assetsmore than six times the capitalization of U.S. banks, where equity represents about 10%. Debt usage is moderate and largely reflects bank credit lines used for liquidity management. Fund lives average 10-12 years, while underlying loan maturities are generally shorter, implying little or no maturity mismatch-unlike banks, which fund long-term assets with short-term callable deposits. Private credit portfolios are diversified across industries, geographies, and credit strategies, reducing exposure to correlated shocks. Performance data show positive average net annualized returns with limited downside risk to creditors, as losses are largely borne by equity investors. Overall, private credit funds appear conservatively structured and unlikely to pose systemic risks comparable to traditional banks under their current balance-sheet configurations. We conclude by discussing potential vulnerabilities that could emerge as the sector grows, including governance and disclosure frictions, stress-period dynamics, bank-nonbank linkages, and the transmission of losses through limited partner balance sheets and retail investment vehicles.