Private Credit Demystified

Private credit has seen remarkable growth over the past several decades — a trend that has gathered pace and we believe shows no signs of slowing. The asset class has grown from just $0.3 trillion in 2009 to nearly $1.7 trillion today and is projected to reach $2.88 trillion by 2028.¹

Despite its growing prominence in investing conversations, private credit is often misunderstood. Simply put, private credit refers to loans made directly to a borrower from a non-bank lender. It’s essentially a way to provide debt financing to borrowers who are unable to access traditional bank loans or public markets, typically due to the nature or size of their businesses.

Private credit offers significant potential benefits for investors. These include:

• minimizing interest rate risk

• attractive yields and long-term returns

• lower volatility than liquid debt instruments, downside risk mitigation

• enhanced diversification

In Private Credit Demystified, published by the Alts Institute, we explore private credit characteristics and the various private market strategies. We’ll also discuss the reasons behind private credit growth, why it’s expected to continue on its growth trajectory, and the ways an allocation to private credit can potentially benefit a portfolio.

¹Source: Preqin Special Report: The Future of Alternatives in 2027 (published October 2022); Preqin Global Report, Private Debt 2024 (published December 2023). There is no assurance that such events or projections will occur, and actual outcomes may be significantly different than those shown.

ID 1779