Private credit, also known as private debt, generally refers to loans that are privately negotiated between a lender and a borrower. The asset class itself has grown substantially following the 2008 Global Financial Crisis as banks de-risked their balance sheets and tightened their lending standards . The void left as a result was subsequently filled by non-bank (private) lenders
These alternative lenders serve borrowers and help investors seeking yield in a low interest rate environment. Private credit has the potential to provide higher yield opportunities than traditional fixed income investments, as it provides capital to borrowers at a premium due to the illiquid nature of private credit.
1. Mercer, Private Debt Asset Class Update, 2018.