March 26 (Reuters) - Private credit has limited ability

to cause significant losses that could hurt the broader

financial system, Barclays said on Thursday, despite growing

strains on the asset class.

Jitters in private credit have rippled through markets this

month, with major U.S. banks tightening lending and funds

capping withdrawals as mounting concerns over valuations,

transparency and the health of the economy prompted some

investors to exit the sector.

* Barclays in a note said that most private credit holdings

are with long-term institutional investors, such as pensions,

endowments, sovereign wealth funds and insurers, whose

obligations aren't easily shaken by short-term market

volatility.

* At the same time, private credit's retail exposure has

grown but remains concentrated.

* This combination reduces the risk of sudden, correlated

selling pressure that could trigger broader financial contagion,

Barclays added.

* "While the asset class has undoubtedly expanded, increased

leverage within the financial system, and become more

interconnected, scale alone does not imply systemic risk,"

Barclays said.

* Shares of alternative asset managers have also come under

pressure this year amid growing concerns over the valuations of

software companies they own or finance.

* Barclays says this exposure will test lenders'

underwriting discipline, though any shakeout is likely to unfold

slowly through lower payouts, discounted secondary sales and

isolated losses rather than an abrupt correction.

* "Any assessment of systemic risk must therefore narrow its

focus to the segments where leverage, opacity, and borrower

cyclicality actually intersect, which we believe is most acute

in the ~$1.3 trillion of deployed middle market direct lending

in the U.S. today," Barclays said.