Alternatives Unlocked: Private Credit

Unlocking Private Credit

 

WHAT IS PRIVATE CREDIT?

Private Credit Investing Basics

Credit is a contract (often, a loan) that a borrower repays a lender with interest. Private credit refers to privately negotiated loans between a borrower and a non-bank lender. 

 

A History of Private Credit  

Private Credit is a fast-growing asset class and there are several forces behind its rise.
 

Comparing Private Credit to Traditional Fixed Income

Private credit may offer the potential for higher yield and increased investor protections through negotiated terms, covenants and pricing.
 
 Traditional Fixed Income
 Private Credit
MARKET DESCRIPTION Publicly Syndicated and Sold Privately Originated and Held
TRADED Yes No
COUPON PAYMENTS Yes Yes
COUPON STRUCTURE Typically Fixed Rate Typically Floating Rate
CREDIT RATING Rated Not Rated
CALL PROTECTION Varies Yes
LIQUIDITY Liquid Illiquid
VALUATIONS Frequent Infrequent
 

For illustrative purposes only.

 
 

ATTRIBUTES OF PRIVATE CREDIT INVESTMENTS

Private Credit Investments Typically Seek to Deliver... 

 

CONSIDERATIONS FOR PRIVATE CREDIT INVESTING

Here are some common types of private credit investment strategies:   

 
 
 

Illustrative Risk/Return Profiles by Fund Type

While each has a unique risk and return profile, there are some broad risk/return generalizations for each of the private credit asset classes based on historical data.
Illustrative Risk/Return Profiles by Fund Type (Vintages 2011-2017)
For illustrative purposes only. Source: Preqin, hypothetical illustration based on historical risk and return analysis, vintages 2011-2017, the most recent data available from Preqin.
Illustrative Risk/Return Profiles by Fund Type (Vintages 2011-2017)
For illustrative purposes only. Source: Preqin, hypothetical illustration based on historical risk and return analysis, vintages 2011-2017, the most recent data available from Preqin.
 
 

There are several factors that drive the risk/return profile of private credit investments:

Explore Continuing Education On-Demand
For Financial Professionals Only

Continuing Education: Introduction to Private Credit


An on demand webcast offering one hour of continuing education (CE) credits.

Explore Other Private Market Asset Classes
Dig deeper into three other private market asset classes to learn what they are, why they matter, and how they may fit within existing portfolios.
  • Private Equity
    Private equity involves investment in private companies with growth potential or private businesses that need financial restructuring with the intention of enhancing the value of the invested companies over time.
    Learn More
  • Private Infrastructure
    Private Infrastructure entails the raising of private capital to fund the development of infrastructure, including the physical structures, facilities and systems, required for economies and societies to function.
    Learn More
  • Private Real Estate
    Private real estate refers to investment in real estate properties that are privately owned and managed by individuals, partnerships, or private companies, rather than being publicly traded in the stock market.
    Learn More