There is growing concern about the risks facing private credit funds in the US, with multiple lenders restricting withdrawals and one major bank clamping down on lending in the area.
Private credit funds see companies and investors offer lending to other businesses. It became a sizable force in US markets following the 2008 financial crisis, filling a gap left by risk-adverse banks.
"They were a form of low-liquidity lending," said Davy chief economist Kevin Timoney. "So in a way, quite different in traditional banking terms when we think about which sorts of things these will be invested in later on.
"It's generally into private equity-type alternative investments... so off the beaten track a little bit for most investors, but an opportunity to add risk and to potentially add return as well."
However there has been growing unease about the health of the market, with rising defaults prompting questions around the due diligence and valuations that underpin funds' lending.
Major players in the market including Goldman Sachs, Blackrock and Cliffwater have seen a surge in customers looking to withdraw their money from these funds - prompting them to impose withdrawal limits - while JP Morgan has reportedly clamped down on lending to private credit in order to limit its exposure to the sector.
According to Mr Timoney, this seems to have in part been prompted by concerns about the future of many major software companies.
"Some of the software firms have been under pressure in recent weeks due to the notion that AI can somewhat replace what they're doing for a lower cost," he said. "These vehicles have been tied up in underlying investments like those," he said.
"If the underlying investments are seen to have lost value, people might come back looking to get their money back essentially at the same time. And then you have a bit of pressure on the underlying private credit ecosystem," he added.
Some market analysts have compared the current situation to the one seen in the lead up to the financial crisis, when the assets large banks held plummeted in value and they did not have enough cash available to cover losses.
However while the private credit market is estimated to be worth $2 trillion, that would make it considerably smaller than the size of the traditional banking industry. Meanwhile Mr Timoney says lenders are not nearly as leveraged as they were 18 years ago.
"I think the consensus at the moment that I've seen is that while there might be concern about history repeating, it's more of a case of it rhyming here," he said. "You have a relatively small sector, it's not comparable to the overall size of banking.
"Leverage was really quite out of control in the 2000s - the hope and the expectation at the moment is that it's much smaller leverage exposure in this case and that it's not as broadly exposed in the economy as well."
It is hoped that this means there is less risk of contagion in the broader economy, even if private credit funds begin to suffer substantial losses or even collapses.
However adding to the concerns around that is the fact that the market is heavily influenced by interest rates, which now have the potential to stay higher for longer - and even rise again - on the back of US-Israeli attacks on Iran.
"So that could lead to higher interest rates, that could lead to pressure on some of these vehicles again and the credit quality coming under pressure," he said. "That's one contagion risk you could see."
