(Bloomberg) -- Jamie Dimon said he expects problems to emerge in private credit and warned that “there could be hell to pay,” particularly as retail clients gain access to the booming asset class.  

“Do you want to give access to retail clients on some of these less liquid products? Well the answer is — probably, but don’t act like there’s no risk with that,” the JPMorgan Chase & Co. chief executive officer said at an industry conference Wednesday. “Retail clients tend to circle the block and call their senators and congressmen.”

JPMorgan and other lenders have been competing with the $1.7 trillion private-credit industry, with giants such as Apollo Global Management Inc. taking on ever-larger deals. But banks have sought to make inroads of their own: Dimon’s company has earmarked more than $10 billion of its own balance sheet for direct lending, and is putting together a co-lending partnership. Its asset manager is also on the hunt to buy a private-credit firm, Bloomberg reported last week.

Dimon said Wednesday that his firm wants to be product-agnostic in its lending to clients, and that his firm also banks many of the key private-credit shops. Some in the industry are “brilliant,” he said, but not all of them, and problems in the market are often caused by the “not good” ones.

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Dimon’s caution comes amid some signs that trouble may be brewing. Former Apollo partner Sachin Khajuria, who runs family office firm Achilles Management and invests across private assets, said this month that there are cracks forming in direct lending as money keeps flooding in. Meanwhile, Moody’s last month cut its outlook on direct lending funds with ties to some of the largest fund managers in the space, including BlackRock Inc., KKR & Co. and Oaktree Capital Management.

The longtime CEO wrote in his annual letter to shareholders that the private-credit industry has not yet been tested by bad markets, which tend to expose the “weaknesses of new products.” 

“I’ve seen a couple of these deals that were rated by a ratings agency, and I have to confess it shocked me what they got rated,” Dimon said on Wednesday. “It reminds me a little bit of mortgages.” 

(Updates with additional context in fifth paragraph.)

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