SEC Chief Says "Private Credit Not a Systemic Risk at Present"

"Pro-Market" Chairman Paul Atkins
Maintains Policy of Expanding Individual Investor Access to Private Markets
Some Criticize SEC Policy

While concerns have risen over the U.S. private credit (private lending) market in the wake of the recent "Blue Owl incident," the head of the U.S. Securities and Exchange Commission (SEC) has made it clear that he intends to maintain the current policy of expanding individual investors' access to private markets.

Paul Atkins, Chairman of the U.S. Securities and Exchange Commission (SEC). Photo by Reuters and Yonhap News Agency

According to CSPAN on the 13th (local time), Paul Atkins, Chairman of the U.S. Securities and Exchange Commission (SEC), responded to a question regarding the balance between investor protection and accessibility at the International Monetary Fund (IMF) Spring Meetings by stating, "If you can't afford to take losses, you should not enter the market." He added, "The U.S. goal is to establish reasonable regulations," and emphasized, "The core issue is how to design access for individual investors to various asset markets."

He underscored the necessity of private investment by citing examples of pension funds that had avoided private markets. Previously, one of the largest U.S. pension funds halted all private market investments after the financial crisis and invested solely in public markets for roughly a decade. As a result, its asset-to-liability ratio fell from the 90% range to the 70% range. Although the fund later returned to the private market, it is expected to take 20 to 30 years to recover to its previous level. In contrast, a similar pension fund that maintained private market investments has reportedly managed to keep its asset-to-liability ratio at around 90%.

Chairman Atkins remarked, "This is a clear lesson," noting that individual investors are already indirectly exposed to private markets through pension funds and insurance, among other vehicles. However, he pointed out that direct investment opportunities via personal retirement accounts such as 401(k)s have remained limited. He added, "With appropriate guidelines and disclosure frameworks in place, greater individual investor participation is possible. However, fee structures and risks must be transparently disclosed."

He also offered a positive assessment of the private market's role in filling the gap left by reduced bank lending. "The private market is dynamic and plays an essential role in the economy," he said, explaining that "following Basel regulations and the Dodd-Frank Act, banks have withdrawn from lending, and private markets have stepped in to take on those risks." He stressed, "So far, private markets have not posed risks at a level that threatens the entire financial system. However, as investing is inherently risky, those risks must be fully explained to investors."

Some in the market have voiced concerns over the SEC's stance. According to the Financial Times (FT), critics argue that the assets in the private lending industry are relatively illiquid and do not align with the needs of individual investors, who may require quick access to their funds. In fact, in the first quarter of this year, redemption requests totaling more than $20 billion were made in the private lending market. Early this year, U.S. private credit manager Blue Owl Capital was hit with large-scale redemption requests, triggering warnings throughout the market.

Chairman Atkins was appointed by the second Trump administration and is regarded as a pro-business financial regulatory expert who emphasizes deregulation and market autonomy. He previously served as an SEC commissioner for the Republican Party under the George W. Bush administration.

This content was produced with the assistance of AI translation services.