Phantom Stability: Private credit and what’s already in your clients’ 401(k)s

BlackRock just told investors in a $26 billion private credit fund that they can’t have all their money back right now. Blackstone reported record withdrawal requests from an $82 billion fund the same week. Blue Owl suspended redemptions in a flagship fund entirely.

The product behind those headlines is private credit. It’s a $3.5 trillion market most clients have never heard of, and the executive order signed in August of 2025 opened the door to bring it directly to the $13 trillion defined contribution market — meaning the 401(k)s most clients think they understand.

That’s the through-line of Episode 60 of March to a Million: not panic, not doom — a warning. RJ Malyk and I walked through what private credit is, why it’s grown the way it has, why the cracks are showing up in 2026, and the specific steps a client can take this month to know what they actually own.

Here’s what stood out, as someone who works with attorneys and advisors every day.

The market doubled the high-yield bond market in five years. 

In 2009 private credit was a niche. By 2020 it was roughly a trillion dollars. Today it’s $3.5 trillion, and Morgan Stanley projects $5 trillion by 2029. Capital deployment grew 78% in 2024 alone. For comparison, the entire US junk bond market is roughly $1.4 trillion — and operates with far more disclosure. Private credit is larger, faster-growing, and quieter.

Phantom stability is the structural risk.

These loans don’t trade on public markets. The fund manager assigns the value using internal models. When a borrower starts struggling, the official book value can stay elevated long after the real risk has spiked. The funds look stable. The funds report stable. The CFA Institute has called the category inappropriate for most retail investors due to illiquidity, high cost, and limited transparency. The 2026 redemption gates are the first time those internal valuations are being tested at scale.

The 401(k) door is open as of August 2025. 

A presidential executive order cleared private credit for inclusion in defined contribution plans. That doesn’t mean every target date fund holds it tomorrow. It does mean a client looking at a 2030 target date fund in twelve months may be holding it and not realize it. The Enron parallel is the right one — most of the people who lost money in Enron didn’t know they owned Enron. It was inside the large-cap, small-cap, and balanced funds they thought were diversified.

Pension funds and insurers are already exposed. 

State and teacher pension plans have allocated to private credit chasing yield. Insurance companies, including the carriers behind annuities and life insurance, have done the same. If the sector takes a meaningful write-down, the second-order effects land in places clients assume are safe — pension funding gaps widen, insurer reserves get pressured. None of that is hypothetical. All of it has to be on the planner’s map.

Diversification has to mean diversification. 

A portfolio that’s 80%+ US equities isn’t diversified — it’s concentrated, and the contagion path from a private credit blow-out to broad equities runs through the same multi-asset funds and pension allocations that hold both. Real assets, international exposure, fixed income alternatives, and principal-protected structures all earn a closer look in this environment. Boring four-to-five-percent treasuries on a risk-adjusted basis start to look different next to eight-to-twelve-percent yields carrying gating risk.

The hard part of this conversation with clients isn’t the math. It’s the framing. Clients won’t ask whether their target date fund holds private credit. They’ll assume the plan knows.

Four questions worth running with the clients in our books this month.

What private credit exposure exists, directly or inside target date and balanced funds?

What percentage of the portfolio sits in US equities only — and is that concentration intentional?

Is any portion of the portfolio principal-protected against a 30%+ drawdown — and if not, is that the client’s actual risk tolerance or just their assumed one?

If the household couldn’t sleep through a 40% market decline, does the current allocation reflect that?

None of this is a forecast. It’s a read on the trajectory and the structure. Private credit isn’t an obscure Wall Street product anymore. It’s $3.5 trillion, it’s starting to crack in real time, and the regulatory door to 401(k)s is already open.

Listen to the full episode wherever you get your podcasts: March to a Million Episode 60.