What Is Private Credit?

Private credit is the quiet giant of modern finance. A decade ago it was a niche; today it is one of the largest and fastest-growing asset classes in the world, and a core holding in most sophisticated portfolios. The idea behind it is simple.

What it is

Private credit is lending to companies by investors instead of banks. Rather than buying a company's shares (equity), a private credit fund lends it money and earns interest and fees in return. The loans are private, negotiated directly between the fund and the borrower, and not traded on public markets.

It is also called private debt or, for its most common form, direct lending.

Why it exploded

Private credit grew into the gap left by banks retreating from mid-market lending after the financial crisis and tighter regulation. Companies still needed to borrow; investors wanted yield. Funds stepped in to lend directly, and the market took off. Global private credit assets exceeded 1.7 trillion dollars by 2024 and are forecast to reach roughly 2.8 trillion by 2028, having grown by about half in just four years.

The forms have multiplied too: senior direct lending (the core), asset-based lending, mezzanine debt, and specialist strategies such as litigation finance and NAV lending.

Why families like it

For a family office, private credit does something equities cannot: it pays steady, contractual income. Interest arrives on a schedule, and because debt sits higher in a company's capital structure than equity, lenders are repaid before shareholders if things go wrong. Returns are largely uncorrelated with public markets, and the illiquidity suits patient capital. That combination, income, seniority, diversification, is why private credit has moved from a niche allocation to a core one in family office portfolios.

The caution, as the asset class matures and capital floods in, is that not all private credit is equal: yield can mask risk, and a downturn will test how carefully each fund actually lent. As always, the structure matters, and so does the manager.