Key points
- Growing alternative to traditional bank loans.
- Higher yields but illiquid.
- Less regulated than public debt markets.
Example
A private credit fund might lend to a mid-sized company at around 10-12%, several points above short-term rates, compared with roughly 5-6% on public investment-grade bonds. Investors accept less liquidity and more risk for the difference.
In history
Private credit grew rapidly after 2008 as banks pulled back from riskier lending; by 2023 the market was estimated at around $1.5 trillion.
Related terms