It is lightly regulated. The size of the exposure is often unknown. And many of the loans are of remarkably low quality.

It remains to be seen whether we are in the middle of an epic financial bubble or not. We will only know for sure once we have the benefit of hindsight.

And yet, one point is becoming increasingly clear: if we are, it is not a soaring gold price or the crazy valuations of anything connected to artificial intelligence that will bring it crashing down to Earth. It is the murky world of shadow banking – and the signs of stress are already becoming alarmingly obvious to anyone who cares to look.

Are we hurtling towards the next crash?Credit: AP

With sharemarkets hitting record highs, and with the price of gold and its digital equivalent Bitcoin soaring, there are plenty of signs that the markets are going through a phase of what the former Federal Reserve chairman Alan Greenspan used to refer to as “irrational exuberance”.

And yet, the first cracks are also starting to appear. Investors have started selling off shares in some of the world’s largest money managers on fears that their vast holdings of “private credit” are an accident waiting to happen.

The value of giants such as Blackstone, KKR and Apollo have fallen by an average of 10 per cent or more over the last month even as the rest of the market hits fresh highs.

No one who is familiar with the long history of asset bubbles should be in the least surprised if the market starts to collapse, leaving a trail of wreckage in its wake.

The explanation? Investors are quite rightly worried about the........

© The Sydney Morning Herald