Fears of a private credit crisis are intensifying as firms at the center of the growing but opaque bond market face mounting investor redemptions. The stress is arriving at an awkward moment — just over a year after the Securities and Exchange Commission approved the first ETF branded as a private credit fund, bringing the asset class closer to everyday investors.
The fallout is already visible in ETF prices. The VanEck BDC Income ETF (BIZD), a $1.5 billion fund dating back to 2013, has dropped 13% since the start of the year. Among its top holdings are publicly traded shares of private credit managers like Blue Owl Capital, which has plunged more than 46% in 2026. The Simplify VettaFi Private Credit Strategy ETF (PCR) is down roughly 20% over the past year.
Liquidity sits at the heart of the tension. Private credit was never designed for the kind of daily trading that ETFs facilitate. Todd Rosenbluth, head of research at VettaFi, noted on CNBC's "ETF Edge" that while ETF investors always have the option to sell, they may pay a steep price. "You can get out, you're just going to pay or you're going to sell at a discount to net asset value," he said. BIZD closed at a discount to its net asset value 37 times in 2025 and has already done so 12 times this year.
Traditional private credit funds have responded to the stress by restricting withdrawals — a practice known as gating. While such limits help prevent forced selling and broader instability, they do little to ease market anxiety. "You're gating because you said we can't have a run on the bank," Rosenbluth said.
The structural safeguards built into ETFs offer some protection. Funds that invest directly in private credit issues are capped at 35% exposure to the asset class, while older products like BIZD gain only indirect exposure through business development companies and closed-end funds. State Street's private credit ETFs, developed with Apollo Global Management and including the first SEC-approved private credit branded fund (PRIV), represent a newer approach to packaging the asset class for retail investors. But with bank stocks also trading at depressed valuations heading into earnings season, the broader financial landscape suggests investors are pricing in deeper uncertainty across credit markets.