Private credit, often criticized for opacity and illiquidity, faces scrutiny as investors fear its risks. Critics argue it’s unsuitable for retirement accounts, citing withdrawal restrictions and potential losses. But the core issue isn’t private credit itself—it’s concentration. When capital clusters around narrow strategies, single managers, or limited issuers, portfolios become vulnerable. The 1991 collapse of Executive Life Insurance, which loaded GICs with junk bonds, exemplifies this: the structure wasn’t flawed, but over-reliance on one provider caused fallout.

Diversification remains the antidote. Assets fail when portfolios lack balance, not when specific instruments underperform. Private credit includes diverse strategies—senior loans, asset-backed financing, secondaries—each with varying risk. Blurring these distinctions obscures true exposure. Just as public markets discourage single-stock bets, private markets require spread bets across managers, sectors, and vintages. Pension funds and endowments use private assets effectively by diversifying across decades, reducing reliance on any one market outcome.

Liquidity is a design choice, not a flaw. While private markets lack public-market liquidity, their role in portfolios depends on alignment with investor goals. Defined contribution plans entering private markets must apply institutional standards: transparency, prudence, and disciplined allocation. The lesson from GICs and other asset classes is clear: don’t blame the tool—ask if the portfolio was built to withstand shocks.

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**Focus on diversification—not asset class fear—is key to sustainable investing.