Villeroy de Galhau urges transparency for private market stability

Over the past two decades, private markets have seen significant growth, with assets under management in private market funds globally more than tripling between 2004 and 2024, reaching $16.2 trillion by June 2025.

This rapid expansion has been driven by investors seeking higher returns in a low-interest-rate environment, a decline in IPO interest, and post-crisis regulations that encouraged banks to focus on safer assets.

Private credit structures have also emerged as alternative financing for highly indebted companies.

Villeroy de Galhau focused on private equity, which constitutes 65 percent of global private assets under management, and private credit, accounting for 11 percent.

The rapid development of private markets introduces two primary vulnerabilities.

Liquidity risk is a current concern, highlighted by significant redemption requests faced by major firms like Blue Owl Capital, Blackstone, and BlackRock, with one fund activating its 5 percent redemption limit.

The increasing use of semi-liquid vehicles for retail investors could exacerbate this risk.

Additionally, private markets are exposed to valuation risk, as demonstrated by large-cap private equity failures and downward revaluations by some banks on private credit investments.

Opaque lending terms, such as payment-in-kind (PIK) and less stringent covenants, along with complex leveraged financing structures, can mask borrower vulnerabilities.

These issues were evident in recent bankruptcies like First Brands and Tricolor.

The growing interconnectedness between private markets and other financial institutions further amplifies these systemic vulnerabilities.