2 | Private credit – stressed, tested, but marching on

It seems not a week goes by without more headlines about private credit. For some in the sector, the first half of 2026 has been a difficult period. Concerns over underwriting standards, transparency and asset-valuations have given rise to a wave of redemption requests from retail investors, particularly in US funds – albeit it appears institutional investors are increasingly looking to fill the void. The market in the UK continues to evolve, with a growing number of long-term asset funds providing investor access to private credit, amongst other asset classes.

Hot on the heels of First Brands and Tricolor in the US, the UK saw its own large-scale collapse of a private-credit-backed business amid allegations of fraud, when Market Financial Solutions (MFS) entered administration in February.

MFS’s insolvency has given rise to claims in excess of £1.3bn against the company’s founder, Pradesh Raja, by the administrators and Barclays-backed London Bridging Limited, with the Financial Conduct Authority also opening an enforcement investigation. MFS also highlights the indirect exposure of banks to the private credit market, with HSBC, Barclays and Santander being exposed to hundreds of millions in potential losses.

The implosion of First Brands and Tricolor has led to a proliferation of claims in the US. In addition to claims brought by liquidators and creditors against former executives, the US has also seen securities class actions brought by investors against the private credit funds themselves, as well as derivative claims brought by investors on behalf of the fund itself against the fund managers.

Tensions have also started to rise over the growing use of ‘continuation funds’ in both private credit and private equity – a secondary transaction where the assets of a pre-existing fund are acquired by a new fund (both run by the same manager), and many of the original investors cash out to be replaced by new ones. Often seen as an important source of liquidity, concerns have risen over the inherent conflicts of interest involved for fund managers – with court and arbitration claims already being brought in the US for breaches of fiduciary duty.

Whilst not all of the US-style actions would be viable under English law and procedure, there remains ample scope for claims when investors and lenders who may have lost out start to scrutinise what they were told, sold or signed.