What is Private Credit?
Private credit is a form of lending where funds — rather than banks — provide loans or other debt instruments directly to companies. It has grown into one of the largest alternative asset classes, particularly after banks retreated from mid-market lending.
Private credit funds lend to companies that need capital but cannot or choose not to access public bond markets or bank loans. Strategies include direct lending, mezzanine financing, distressed debt, and asset-backed lending. Returns come from interest income rather than equity appreciation.
For LPs, private credit is attractive for its regular income, lower correlation to public markets, and historically low default rates in the direct lending segment. Pension funds and insurance companies are particularly active allocators.
Also known as: private debt, direct lending