The Institutional Standard
Private Credit
Private credit, also referred to as private debt, represents a form of lending where non-bank investors provide capital directly to companies, usually private, often mid-sized, that require financing but do not issue bonds in public markets or secure loans from banks. These investments are generally illiquid, bespoke, and privately negotiated, making them fundamentally different from public corporate bonds or syndicated bank loans.
The asset class has grown dramatically in the past decade. Following the Global Financial Crisis, traditional banks retrenched from riskier lending due to tightening regulation, opening the door for asset managers, credit funds, and institutional investors to step in.
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What makes private credit appealing is the risk-return profile: higher yields compared to public credit (to compensate for illiquidity and complexity) and strong lender protections through tailored deal structures and covenants.
Private credit is not a monolith. It spans a range of strategies and borrower types, from conservative senior loans to speculative distressed opportunities. It is used in leveraged buyouts, working capital facilities, growth financings, and rescue capital scenarios.
Types of private credit
Benefits and Characteristics of Private Credit
Illiquidity
These are not tradable instruments like public bonds. Most deals are “buy and hold” to maturity.
Credit enhancement
Often backed by hard assets, first liens, or guarantees, particularly in senior strategies.
Customisation
Lenders negotiate covenants, repayment schedules, collateral requirements, and pricing terms on a deal-by-deal basis.
Higher yield
Depending on risk, returns can range from mid-single digits (core senior debt) to high teens or higher (distressed, mezzanine, venture debt).
Floating-rate structure
Loans are typically benchmarked to base rates (SOFR, SONIA, EURIBOR) with a spread, offering some protection against inflation and interest rate movements.