Private credit prepares for an era of heightened scrutiny

Private credit now plays an integral role in investor holdings and corporate finance, but with more success has come more scrutiny. 

In the UK, regulators are paying closer attention to private credit as evidenced by a recent Bank of England system-wide exploratory deep-dive on private markets finance and a review of private market valuation practices by the Financial Conduct Authority last year.  Similar scrutiny has been raised by regulators across the globe, such as the European Central Bank or the Australian PRA.

On the other side of the Atlantic, the demand for more proactive portfolio monitoring is coming from investors, following high-profile bankruptcies involving private loans and the liquidity woes of lenders financing niche industries.

The asset class is projected to see $2 trillion growth in AUM over the next three years. But the way these assets are monitored and reported on will need to change to meet the needs of investors, regulators, and the broader market.

LP requirements are raising the bar

With longer hold periods tying up LP capital, "liquidity mismatch" has become central to the conversation. This, in turn, has spurred demand for more visibility into holdings. LPs previously satisfied with monthly or even quarterly valuations are now asking GPs to deliver real-time, on-demand, granular reporting that captures the daily impact of market developments and clarifies the alignment between private and public valuations. When Tricolor and First Brands filed for bankruptcy in 2025, investors relying on previous-quarter data were at a significant disadvantage in determining their exposure.

Navigating operational and market realities

The shift to greater transparency holds transformative potential for all participants, but sizable obstacles stand in the way of this goal.

Foremost among them is the complexity of the asset class. In private credit, every deal is bespoke, capital structures are complicated, and activities such as covenant monitoring are resource-intensive and ongoing—a persistent challenge even for seasoned managers. For investors, especially those moving into direct loans, the issue is especially challenging, as they take on in-depth monitoring and analysis of KPIs, covenants, and credit quality for the first time.

The lending landscape as a whole also poses challenges. Recent events have shown how quickly new risks can arise and how difficult they are to anticipate. For example, the conflict between Russia and Ukraine exposed market participants to ESG and sanction risks almost overnight. The volatility and interdependency of today’s markets demand an entirely different level and cadence of analysis for GPs and LPs alike.

Emerging risks and changes in market landscape can compound these structural challenges by increasing strain on existing business models. Most recently this has included questions about the impact of AI on the future revenues of firms in some sectors.

Tools and resources for a new era

Rising investment opportunities and return expectations are forcing managers to simultaneously scale up on crucial areas of the loan lifecycle, including data management, portfolio monitoring, valuation, reporting, and stress testing. 

S&P Global provides a suite of solutions that combine technology, AI, market data, and human expertise to accelerate timeliness and strengthen risk mitigation throughout the loan lifecycle. These include:

• iLEVEL: Monitoring, analyzing, and reporting on private credit portfolios at scale is one of the greatest challenges facing private credit. iLEVEL automates these processes, including data collection, the monitoring and analysis of capitalization structure trends, covenant compliance confirmations, financial spreading, and the creation of credit surveillance reports, tear-sheets, and DDQs. iLEVEL also provides dashboards and data transformation where portfolio data is normalized and then can be sliced and diced to uncover exposures and concentrations to a specific sector, lender, or region. LPs and GPs alike benefit from maintaining a single source of truth for their portfolio data and workflows, enabling portfolio monitoring at scale.
• WSO: Whether you need targeted support for a specific operational challenge or a comprehensive end-to-end solution for loan administration, our WSO Software and Services deliver trusted loan agency, loan servicing and broad reporting capabilities to ensure accurate loan balances, interest accruals and delineation between cash and PIK interest with both position and cash reconciliation across syndicated and private debt portfolios.
• Scorecards: Seeing private credit risk clearly and refactoring the portfolio to mitigate it are challenging due to inconsistent classifications. Investors, lenders and regulators are increasingly scrutinizing underwriting standards, expecting higher levels of methodological rigor and consistency across credit risk assessment. S&P Global’s Credit Assessment Scorecards expose potential default risks for specific markets and asset types using our best-in-class ratings methodology that provides a structured, unbiased third-party analysis. This can then be integrated into the firm's internal risk estimates to bring greater transparency, nuance, and accuracy to the process. 
• Private Markets Valuations: Amid rising illiquidity, a changeable rate environment, and complex covenant-lite and PIK structures, valuations for private credit portfolios are increasingly difficult to perform and increasingly require third-party assurance on their integrity. Our Private Market Valuations enable firms to outsource technology-enabled valuations at scale to a standard reflecting global best practices, with deeper insight into borrower health, market rates, and overall credit quality.
• Integrated capabilities: Integrations between our solutions mean that data from iLEVEL can be used as an input for Private Markets Valuations and Scorecards, and the results published into iLEVEL, maintaining a single source of truth and data consistency throughout. The integration between iLEVEL and WSO delivers a single source of truth through a seamless data flow between back-office loan servicing (WSO) and front / middle-office portfolio monitoring (iLEVEL), eliminating data silos and reconciliation requirements, while improving data accuracy and enabling faster close and reporting cycles.

Achieving transparency at scale in private credit

As regulatory scrutiny and market volatility increase, GPs and LPs need to establish deeper sightlines into risk and performance data for private credit. And with private credit AUM slated for significant growth, they need to scale up these capabilities quickly.   

We are helping market participants prepare for this reality with industry-leading automation, risk, and valuation methodologies that bring rigor, clarity, and efficiency to the asset class.  

Learn more about how our private credit solutions are helping market participants identify opportunity, mitigate risk, and achieve optimal returns.