Sometimes financial myths have staying power, persisting not because they are true but because they somehow feel true. When Kort Schnabel, CEO of ARCC and Co-Head of U.S. Direct Lending in the Ares Credit Group, encounters the perception that private credit lacks transparency, his response to the notion is direct: “It couldn’t be more false.”
Schnabel oversees Ares’ lending operations, making him intimately familiar with the disclosure requirements which critics claim don’t exist. The transparency they insist is missing is in fact embedded in the industry’s DNA.
A large amount of information gets filed with the SEC quarterly, creating an exceptionally detailed level of disclosure. “We believe actually the level of transparency is almost higher within private credit than it is vs. banks relative to a lot of the loans that they’re making,” Schnabel said. Business Development Companies (BDC) file Schedule of Investments (SOI) reports that itemize every single loan, a level of specific disclosure that traditional banks typically don’t offer.
This transparency extends to regulatory oversight, another area where misconceptions persist. “We’re actually regulated by 25 different global regulatory bodies as well as many local state regulatory bodies,” Schnabel explained, addressing concerns that private credit operates without sufficient oversight. “The SEC is obviously an important institution that oversees publicly traded BDC, so there’s lots and lots of regulatory bodies that look at our industry and spend a lot of time ensuring that we are not creating risk in the financial system.”
We believe the scope of this disclosure is substantial. Ares Capital Corporation (ARCC) alone reports on over 585 portfolio companies quarterly, with each loan’s current market value updated and disclosed. Across the industry, this creates a comprehensive window into lending activity: The 200,000 middle-market companies that private credit serves generate a third of America’s private sector GDP and employ 48 million people—representing a significant and well-documented segment of the economy.
The transparency debate around private credit matters because it affects how institutional investors allocate capital across a $2 trillion market. Asset allocators who’ve been avoiding private credit due to transparency concerns may be missing opportunities in a sector that already provides more loan-level disclosure than traditional banks. For an industry often accused of operating in shadows, we believe private credit has needed—and wanted—to operate in the light.
