Private credit totals roughly $3.5 trillion, Goldman says. The bank argues the market will keep expanding despite recent retail-driven volatility. Goldman executives pointed to borrower demand and structural gaps left by public markets.

Why Goldman is doubling down

Goldman kicked off earnings season arguing that private credit still merits investment, citing demand and attractive risk-adjusted returns. The firm reported $17.2 billion in net revenue for the quarter, and executives used the results call to explain why they're still backing the sector even as headlines focus on stress in retail-facing vehicles.

David Solomon, Goldman Sachs chief executive officer, told analysts the firm "feel[s] good about the long-term opportunity of private credit and our ability to deliver attractive risk-adjusted returns for clients." That's not blind optimism. Solomon also acknowledged greater volatility tied to technology disruption, geopolitical tensions and uncertainty in parts of private credit.

Denis Coleman, chief financial officer, said deposit growth and balance-sheet strategy created room for expanded lending where the firm sees opportunity. Deposits climbed to $561 billion in the quarter, up from $501 billion a year earlier, and Goldman used that funding to increase lending in equities financing, corporate loans and private-wealth lines.

The bank is folding private credit into a broader plan that combines lending with heavier spending on data, cloud and AI to improve underwriting and monitoring efficiency.

Retail turmoil vs. Institutional backbone

Headlines about BDCs and other retail-facing funds have diverted attention from private credit's broader structural role in corporate finance.

Goldman’s internal research team distinguishes the retail BDC segment — which has drawn most of the recent headlines — from the institutional bulk of the market.

The key point: institutional investors constitute the vast majority of private credit assets. Direct lending alone is estimated at roughly $1.6 trillion to $1.7 trillion, and the bank notes the retail channel for that direct-lending bucket is only about 20%, or roughly $230 billion of net asset value.

Those proportions matter because the mechanics that drive a closed-end, institutionally held drawdown fund differ from a semi-liquid product sold to affluent individuals. Vivek Bantwal, global co-head of private credit at Goldman Sachs Asset Management, said private credit is getting a lot of media attention — and some of it isn’t nuanced. He pointed to data showing low default and overdue loan levels across public and private credit, and to borrower performance that in many cases has shown double-digit revenue and EBITDA growth.

Structural demand and an addressable market

Goldman’s research team argues the private-credit market isn't oversized relative to corporate financing needs. For one thing, a large share of mid-sized and larger companies are privately held: about 63% of U.S. Firms with at least $100 million in annual revenue are private. That proportion is even higher in parts of Europe and the U.K.

And the total revenue run rate of private firms across the U.S., EU and U.K. Is enormous — nearly $12 trillion, by Goldman’s math. That creates a steady stream of borrowers that might not fit neatly into public syndicated markets, especially as average deal sizes in syndicated markets have climbed.

Goldman highlights a practical consequence: between 2022 and 2025 the average high-yield bond deal size ran about $791 million. Smaller or middle-market borrowers seeking more modest sums increasingly find the syndicated loan or bond markets unsuitable. That gap is where private lenders compete, and the rise of larger private-credit deals — so-called jumbo loans of $1 billion or more — means private lenders can also pursue bigger corporate financings than in the past.

Performance, risk and the next downturn

Bantwal warned that the industry hasn’t been fully tested through a complete credit cycle since the post-financial-crisis recovery. Underwriting standards can drift during long periods of benign conditions, and new entrants to private credit may not have experience handling a deep downturn. That could produce dispersion in outcomes when stress returns.

Still, he and Goldman's data teams point to the Cliffwater Direct Lending Index and other measures showing historically low default rates and solid borrower metrics so far. The market has also become more fluid: Goldman documents dozens of borrowers shifting between private credit and syndicated markets, and refinancing flows that show private credit isn't always the lender of last resort.

Technical forces, such as retail outflows from semi-liquid vehicles, can influence spreads and pricing as much as borrower fundamentals do. Retail outflows from semi-liquid structures can push yields higher and create headline risk even if underlying borrower credit metrics remain sturdy. That dynamic can widen spreads relative to risk-free rates and make market pricing look worse than the underlying credit picture.

How Goldman plans to capitalize

Goldman is combining balance-sheet lending, private-credit distribution to institutional clients, and efforts to expand retail access through channels like Marcus. The bank cited elevated engagement in its digital platforms — Marquee users rose more than 30% year-over-year — as part of a push to reach clients where they're and scale distribution.

Executives said they're accelerating spending on cloud migration and data architecture to better deploy AI tools across the firm. Coleman framed that as a productivity move: better data and infrastructure should let the bank underwrite more efficiently and monitor loans more closely over time.

Goldman also points to rising private-credit activity outside the U.S., especially in regions where banks still dominate corporate lending. That suggests scope for global growth as private credit fills gaps in regions where syndicated markets are less accessible for mid-sized companies.

Where risks remain

Goldman doesn't paint a risk-free picture. Geopolitical shocks, sector disruption from AI, and the expansion of lenders with limited cycle experience could all create pockets of trouble. But the firm says those pockets are embeddable in a larger, structurally driven market for private financing.

Far from dismissing recent stress, Goldman and its asset-management leaders have urged more transparency from managers and better explanations of liquidity terms for retail clients. That’s partly an attempt to calm misperceptions and partly a way to protect the broader reputation of the asset class.

Still, the possibility of a recession would test private lenders in ways benign markets haven’t. Bank and public credit players face similar challenges, and history shows the next downturn would sort strong underwriting from weak.

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"Private credit in the broadest definition you could possibly come up with is $3.5 trillion dollars of assets," David Solomon, Goldman Sachs chief executive officer, said.