Private credit is an asset class that's very much in vogue. The global private credit market has now exceeded $1.5 trillion. Those who earn fees from it are understandably enthusiastic about it. But, as ROBIN POWELL explains in his latest article for Timeline, private credit has its risks, and investors should go into it with their eyes wide open.
Most investors will at least have heard of private equity. But less well-known is a related asset class called private credit, or private debt.
Like private equity, private credit focuses on opportunities outside the public markets, but deploys its capital in the form of credit rather than taking equity stakes in businesses. It includes a range of strategies, including direct lending for leveraged buyouts and lending to distressed businesses.
Despite its lower profile, private credit is, in some countries, growing even faster than private equity. The Financial Times recently called it “the investment industry’s hottest neighbourhood”. But, as regular readers of this blog will know, the fact that an asset class is hot is often a very good reason for including it in your portfolio.
So is now a good time to be investing in private credit? Well, let’s start with some historical background.
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