Where Has the Money Gone?

Stewart Foley, CFA
InsuranceAUM

Private credit has been one of the great growth stories in institutional asset management.

We’ve spent years talking about its expansion, the opportunity set, the illiquidity premium, manager selection, and the increasingly important role it plays in insurance company portfolios.

But there’s a question I don’t hear asked nearly enough.

Where has all that money actually gone?

Not which managers raised the most capital. Not how much dry powder is sitting on the sidelines. And not how much private credit AUM has grown.

I mean something more fundamental: Which industries have actually borrowed the money, and how has that changed over time?

For insurance companies allocating billions of dollars across public and private fixed income, I think that’s a question worth exploring.

A $1.4 Trillion Market Deserves a Closer Look

According to the Federal Reserve’s May 2026 Financial Stability Report, private credit loans totaled approximately $1.4 trillion in the second half of 2025. That represented roughly 10% of the debt of U.S. nonfinancial corporations. That’s a meaningful footprint in corporate finance.

The growth itself isn’t particularly surprising. Private credit offers borrowers customized financing, execution certainty, and the ability to negotiate directly with lenders. For institutional investors, it offers access to privately negotiated loans, potentially attractive spreads, and structures that can differ from those available in public markets.

Those characteristics are important. But none of them tells us whether the underlying economic exposures are genuinely different from the rest of an insurer’s investment portfolio.

A loan doesn’t become economically diversified simply because it’s privately originated.

What the Industry Data Actually Tell Us

In August 2026, five Federal Reserve researchers published a study titled “Private Credit and Leveraged Loan Markets: Similarities, Differences, and Substitution.” The research examines the relationship between private credit and broadly syndicated leveraged loans, including borrower characteristics, market structures, and the industries receiving financing.

One of the more interesting findings is how similar the two markets look by industry. The Fed’s analysis of 2025 loan issuances provides the following comparison:

Source: Federal Reserve, FEDS Notes, August 11, 2026, Table 1. “Other” is calculated as the residual. Figures represent issuance composition in the study sample, not comprehensive funded dollar deployment.

Technology and business services together accounted for 33% of private credit issuance, compared with 27% in the leveraged loan market. Healthcare represented another 13%. Taken together, these three broad industry categories represented 46% of the private credit issuance sample.

That doesn’t necessarily mean 46% of all private credit dollars went into those industries. The distinction between issuance composition, transaction counts, and funded dollar amounts matters. But it certainly gives us a reason to look more closely.

If both markets finance many of the same industries, how much diversification are we actually getting by moving from one financing structure to another?

The Software Question

Software deserves particular attention. The same Federal Reserve research found that software borrowers accounted for approximately 21% of private credit issuance since 2020, compared with 16% of leveraged loan issuance.

The researchers also observed that software borrowers tend to be smaller than borrowers in other industries and that approximately half of the software borrowers in their analysis had accessed only the private credit market.

Software companies can offer attractive lending characteristics, including recurring revenue, limited physical capital requirements, and potentially high margins. But software is hardly a homogeneous industry.

Enterprise software, cybersecurity, vertical-market applications, and other technology businesses can have very different competitive positions, customer retention characteristics, and credit risks. The rapid development of artificial intelligence adds another dimension to that analysis.

For lenders, the relevant question isn’t simply whether a borrower operates in software. It’s whether the borrower’s business model, competitive position, and cash flows remain durable over the life of the loan. And for insurers, it’s whether those risks are already represented elsewhere in the general account.

A Look at More Recent Origination Activity

PitchBook LCD’s April 2025 U.S. Private Credit Monitor provides another useful perspective. According to the report, healthcare represented approximately 21% of U.S. direct lending deals during the first four months of 2025, compared with approximately 15% for full-year 2024.

Those are deal counts, not dollars deployed. And comparing four months with a full calendar year requires caution. Still, the data reinforce an important observation: Industry allocation in private credit is not static.

Changes in M&A activity, sponsor demand, interest rates, lending conditions, and relative financing costs can all influence which industries receive capital in any given period. For an insurer making a long-term allocation to private credit, understanding those shifts seems every bit as important as evaluating the historical performance of the asset class.

The Data Problem Nobody Should Ignore

Here’s where this research gets interesting. I wanted to build a straightforward historical analysis showing annual private credit deployment by industry, going back to 2010. That sounds like a relatively simple request. It isn’t.

Private credit is privately negotiated, and there is no universally comprehensive public database of every loan originated, the amount actually funded, and the borrower’s industry.

Preqin publishes historical private debt deal information extending back well before 2010. PitchBook LCD maintains detailed direct lending transaction coverage, particularly from 2019 onward. KBRA Direct Lending Deals provides another source of transaction-level intelligence.

But these datasets don’t necessarily measure the same universe, and their industry classifications, transaction coverage, and reporting methodologies can differ.

There is also a fundamental distinction between a $500 million loan commitment, a $500 million funded loan, and a $500 million position reported at fair value. Those numbers may look similar in a presentation, but they measure different things.

We have useful insight into market composition, but not a complete, consistently defined annual industry-by-industry dollar-deployment history from 2010 through 2026. And I don’t think we should pretend otherwise.

Different Structures, Similar Borrowers?

Another interesting finding in the Federal Reserve’s research is the difference in borrower characteristics. In its comparison of 2025 issuances, the Fed reported median borrower revenue of approximately $223 million for private credit borrowers, compared with $902 million for leveraged loan borrowers.

Median leverage was 5.0 times debt to EBITDA for private credit borrowers, compared with 3.2 times for leveraged loan borrowers. The study also reported a median loan spread of 500 basis points over SOFR for private credit, versus 400 basis points for leveraged loans.

These figures reflect the study’s sample, not the characteristics of every loan in either market. But they illustrate why private credit and leveraged loans should not be viewed as interchangeable investments.

Borrower size, leverage, documentation, liquidity, lender control, and financing flexibility can differ materially. Private credit may provide access to borrowers and structures unavailable in public markets. It can also introduce different underwriting and liquidity considerations.

Different financing structures do not necessarily mean different underlying economic exposures.

What This Means for Insurance Company Portfolios

For insurance investors, I think the industry composition question is especially important. An insurer might hold public investment-grade corporate bonds, high-yield bonds, broadly syndicated loans, CLOs, private placements, and direct lending investments.

Those allocations may sit in different portfolio categories, be managed by different teams, and carry different accounting or capital treatment. But the ultimate borrowers may still be exposed to similar economic forces.

Consider an insurer with meaningful public corporate bond exposure to technology and healthcare. Adding a private credit allocation concentrated in software, healthcare, and business services might improve certain portfolio characteristics. It could provide different borrowers, negotiated protections, or additional income.

But whether it improves economic diversification depends on the combined exposures. And industry classification alone isn’t enough. Two companies classified in the same sector may have very different sensitivities to economic growth, interest rates, labor costs, regulation, and technological change.

That’s why I believe insurance companies should evaluate private credit allocations alongside their existing general account exposures rather than treating private credit as an isolated asset class.

The relevant question isn’t simply how much private credit an insurer owns. It’s what economic risks the insurer owns after adding private credit.

The Research I’d Like to See

The next step is a consistent historical analysis of U.S. corporate direct lending originations by industry. Has technology’s share of annual originations increased over the past decade? Has healthcare become more prominent? How much lending activity is associated with private equity-sponsored transactions?

I’d also like to distinguish annual originations from outstanding portfolio exposure. Both matter, but they tell different stories. Originations show where new lending activity is taking place. Outstanding balances show the exposures investors are carrying.

We have enough evidence to establish that industry concentration deserves attention. We do not yet have a sufficiently consistent public dataset to make definitive claims about every industry’s share of annual funded deployment since 2010.

The Bottom Line

Private credit has earned its place in the institutional investment conversation. For insurers, it offers opportunities that deserve serious consideration, including access to differentiated borrowers, customized financing structures, and potentially attractive risk-adjusted returns.

But as the market grows, I believe the conversation needs to evolve. We’ve spent plenty of time asking how much money is flowing into private credit. We should spend more time asking where that money is going.

Because ultimately, the risk in an insurance company’s investment portfolio isn’t determined by whether a loan is public or private. It’s determined by the borrower, the structure, the price, and the economic risks the insurer has agreed to bear.

And before we can understand the diversification benefit of private credit, we need to understand what we’re actually financing.

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Sources and Research Notes

Federal Reserve Board. Financial Stability Report, May 2026, Box 4.1.

Banegas et al. “Private Credit and Leveraged Loan Markets: Similarities, Differences, and Substitution.” FEDS Notes, August 11, 2026. https://doi.org/10.17016/2380-7172.4133

PitchBook LCD. U.S. Private Credit Monitor, April 2025.

Preqin. 2025 Global Private Debt Report, Figure 1.17.

Research note: Industry statistics reflect the cited datasets and methodologies and are not a complete census of U.S. private credit originations or verified industry shares of total funded dollars.