The 10% Yield Being Sold to Regular Investors — and the Cracks Forming Underneath It

Sector: Finance · July 1, 2026 · 7 min read · By Elizabeta Dimoska

There's a pitch making the rounds that sounds almost too good in a world of choppy markets: a steady 8% to 12% yield, not tied to the daily swings of the stock market, with the comfort of being able to cash out every quarter. It shows up in wealth-management meetings, in slick fund brochures, and increasingly in products aimed squarely at ordinary investors.

The asset class behind it is called private credit, and it has quietly become one of the biggest stories in finance. It's also one where the marketing and the mechanics don't always match — and where regulators spent this spring waving yellow flags that barely made the retail news. Let's unpack what it actually is, in plain English.

What private credit is

When a mid-sized company needs to borrow, it has traditionally gone to a bank or issued bonds. Over the past decade, a third path exploded in size: borrowing directly from investment funds instead of banks. Those funds pool money and lend it out privately, often to companies that are smaller, more leveraged, or otherwise wouldn't get a clean bill of health in the public bond market.

That's private credit. And it's enormous. The Financial Stability Board — the global body that watches for the next financial fire — pegs it at roughly $1.5 to $2 trillion in assets, heavily concentrated in a handful of countries and sectors like technology, healthcare, and business services. (FSB, May 2026)

For years this was an institutional game — pension funds, insurers, endowments. What's new, and what makes it a story for a site like this one, is that the industry is now aggressively opening the door to retail and high-net-worth investors. US retail allocation to private credit is projected to grow at nearly 80% a year, reaching about $2.4 trillion by 2030. (Wellington Management) The vehicles doing the delivering have names most people have never heard of.

The two wrappers you need to know

Non-traded BDCs (business development companies) and interval funds are the main ways everyday money gets into private credit. Interval-fund assets alone grew to nearly $450 billion by mid-2025. (Wellington)

Here's the key feature — and the catch. Unlike a stock or an ETF, you can't sell these whenever you want. They offer limited, periodic redemptions — typically a set percentage of the fund each quarter (often around 5%). In calm times, that feels like "quarterly liquidity." The trouble is what happens when everyone wants out at once.

The cracks that showed up this year

Three things happened in 2025 and 2026 that turned a quiet worry into a live one.

1. Redemptions spiked — fast. Withdrawals from non-traded BDCs jumped to 4.8% of net asset value in Q4 2025, up from 1.6% the quarter before — roughly a 3x increase in a single quarter. Several funds had to meet redemption requests that blew past their normal quarterly caps. (Angel Investors Network) When redemptions hit the cap, funds can "gate" — meaning you get in line and wait. The quarterly liquidity you were sold turns out to be conditional.

2. The "marks" got questioned. Private loans don't trade on an exchange, so their value is an estimate the fund reports. That works fine until reality intrudes. When Blue Owl proposed merging a non-traded fund into a publicly traded one, investors in the private vehicle were looking at roughly a 20% haircut based on the public market's price — the market's blunt opinion of what those "stable" marks were really worth. (Perspective on Risk) A separate episode saw a BlackRock fund disclose a sharp drop in net asset value after having marked many of the same positions far more optimistically not long before. (Perspective on Risk)

3. Borrowers are getting squeezed. The financial health of the companies private credit lends to has weakened. One widely cited measure — how comfortably a borrower's earnings cover its interest payments — has fallen from about 3.1x in 2021 to 1.6x in 2025. At 1.6x, a 40% drop in earnings pushes a borrower toward distress, and roughly 11% of middle-market borrowers already can't cover their interest from operations at all. (Angel Investors Network) Meanwhile, a couple of high-profile blowups in late 2025 — First Brands and Tricolor, both tied to alleged fraud — reminded everyone that private loans can hide problems longer than public ones. (Office of Financial Research)

Why the regulators spoke up

In May 2026, the FSB published a formal report on private credit's vulnerabilities. Its concerns, translated out of regulator-speak:

• Opacity. These borrowers usually don't have public credit ratings, so it's genuinely hard to see how risky the loans are. (FSB)
• Layered leverage. There's borrowing at the company level, the fund level, and sometimes the investor level, stacked on top of each other. In a downturn, layers of leverage amplify losses.
• Liquidity mismatch. Funds that promise redemptions are holding assets that can't actually be sold quickly. That mismatch is the classic ingredient in a run.

The European Central Bank and the Bank of England have voiced similar concerns, and European banks have been disclosing billions in private-credit exposure during earnings season. (CNBC) None of this means a crisis is imminent. It means the asset class is heading into its first real stress test through a full credit cycle — and it's carrying a lot more small investors than it did last time around.

What this means for you

Private credit isn't a scam, and it has delivered real returns for a decade. The 8–12% yields weren't invented. But a few honest translations are worth keeping in your back pocket if one of these products ever lands in front of you:

• "Quarterly liquidity" is not the same as liquidity. If too many people want out, you may be gated. Read exactly how redemptions work, and ask for the fund's current redemption-queue size as a percentage of assets.
• A high yield is a payment for risk, not a free gift. When something pays double what a savings account or a Treasury does, the extra yield is compensating you for something — here, illiquidity and credit risk. That can be a perfectly reasonable trade. It is never a free one.
• "Stable" values can be stable because nobody's checking. An asset that doesn't trade daily looks less volatile than a stock. That smoothness is partly an accounting feature, not proof of safety.
• Watch your concentration. If a big chunk of your money is in one or two private-credit funds from the same manager, you've concentrated your gating risk in a single relationship.

Most RiskStock readers can build a perfectly good long-term portfolio without ever touching private credit — plain, liquid, low-cost index funds do the heavy lifting. But this asset class is coming for the retail channel whether you seek it out or not, so it's worth understanding the machinery before a friendly advisor explains only the good half.

The oldest rule in finance still applies: if you don't fully understand where a yield comes from, that is the risk.

RiskStock is educational, not financial advice. We're not licensed advisors. Always do your own research and consider speaking with a qualified professional before making investment decisions.

Sources: FSB — Report on Vulnerabilities in Private Credit (May 2026); Wellington Management — Private Credit Outlook; CNBC — Private credit's $2 trillion boom raises stability fears; US Office of Financial Research — Measuring Counterparty Exposures to Private Credit; Angel Investors Network — Private Credit Fundraising Fatigue 2026.