What is private credit?
Private credit refers to loans, bonds, and other credit instruments issued through private offerings. These transactions are negotiated directly between lenders and borrowers and typically do not trade on public markets, resulting in a different liquidity profile than traditional fixed income.
Different types of private credit investments
The private credit opportunity set spans two primary categories: corporate lending and asset-backed finance (ABF), each with distinct structures, collateral features, and risk/return profiles. Investors can access private credit through direct or co-investments, primary fund commitments, or secondary transactions.
Benefits of private credit to your portfolio
Private credit is often considered for its potential role in income generation and portfolio diversification. Key characteristics may include a meaningful floating-rate component and historically low-to-moderate correlations versus certain traditional fixed income and public market benchmarks.
The outlook for private credit
After a period of rapid growth, the private credit market is entering a phase where manager dispersion and sector dispersion may increase. This environment can reinforce the importance of selectivity and diversification and may create opportunities during periods of market dislocation.