JPMorgan’s Trades Threaten to Take Privacy Out of Private Credit

JPMorgan Chase & Co. is making the titans of private credit markets very anxious.

The biggest US bank’s foray into trading private credit loans — an as yet largely untapped corner of the $1.7 trillion market — threatens to lift the veil on a world where a key selling point has been privacy of information about the debt.

Some of private credit’s biggest lenders argue such trading would undermine this advantage by forcing them to constantly value the assets on a marked-to-market basis, rather than at their discretion, inviting volatility. On the other side are smaller fund managers and investors in these loans who want more access to the debt and the ability to swiftly exit the assets trading would bring.

That existential debate may be a moot point. If, as some market participants expect, interest rates don’t fall as quickly as predicted — crushing borrowers in the process — private loan valuations could tumble. That will unleash a wave of distressed debt bargains, making trading the assets on a secondary market like bonds a near certainty. And JPMorgan plans to be ready.

“As the market grows, it becomes inevitable,” Troy Rohrbaugh, the freshly promoted co-head of JPMorgan’s commercial and investment bank, said in an interview. “If you believe private credit will continue to grow and compete side-by-side with public debt markets, it can’t continue forever as-is. Transparency will increase over time.”