Private credit: Old market, newly misunderstood

The conversation has narrowed to a single storyline: that private credit is risky, overheated and a potential source of instability. It’s a neat narrative. But it’s also wrong.

The problem isn’t the scrutiny; it’s the oversimplification. A label that should help investors understand a diverse and evolving asset class has instead become shorthand for a very small slice of it.

If we continue to view private credit through this distorted lens, investors risk misjudging an asset class that could play an important, even stabilizing, role in their portfolios.

A label that shrinks an entire asset class

If headlines are to be believed, private credit is all about direct lending to highly leveraged, private-equity-backed companies. This part of the market can indeed experience stress – and when it does, it generates clicks. But direct lending represents only a fraction of what private credit is.

When commentators use private credit and direct lending interchangeably, they collapse a sprawling, multifaceted market into its riskiest corner. It’s no surprise, then, that many people assume the entire asset class is a recent invention, untested, opaque and inherently high risk.

None of this is true.

A market with deeper roots than most realize

Private credit – properly defined as non-bank lending that is privately issued and not publicly traded – has existed for centuries. Long before modern banking, private financing arrangements powered trade, infrastructure, and the development of cities and industries. That legacy continues today.

Take the investment-grade private placement market. Institutional investors have been active participants here for more than a century, with annual issuance exceeding $100 billion in many years. This market offers strong credit quality, bespoke covenant protection and historically low default rates. Yet it rarely makes the headlines. Perhaps because a century of quietly doing its job doesn’t lend itself to sensationalism.

Similarly, areas like infrastructure debt and commercial real estate lending represent large, established segments of private credit. These markets support essential services – from utilities to logistics –and can provide long-dated, stable income streams.

Other segments, such as fund finance and some parts of asset-backed finance, haven’t been around for as long but can provide investors with investment-grade assets capable of delivering enhanced returns with low levels of credit risk.

For many investors, this is what private credit actually looks like.

A moment for clarity … and opportunity

If 2025 told us anything, it is that labels can become lazy. Risk isn’t inherent to the term ‘private credit’; it is inherent to specific borrowers, structures and underwriting decisions. This year, the dispersion within private credit is likely to widen as markets adjust to stickier inflation, uneven growth and shifting bank-lending conditions.

This is precisely why investors should be looking more closely at private credit, not less. For those willing to look beyond the headlines, the asset class offers something unusually rare in today’s markets: a combination of yield, structural protection and diversification. But to seize the opportunity, investors must stop treating private credit as a monolith or as a new fad. It is neither. It is a diverse set of financing markets that have supported the real economy for decades, and which will continue to do so long after the news cycle has moved on.

Important information

Alternative investments involve specific risks that may be greater than those associated with traditional investments; are not suitable for all clients; and intended for experienced and sophisticated investors who meet specific suitability requirements and are willing to bear the high economic risks of the investment. Investments of this type may engage in speculative investment practices; carry additional risk of loss, including possibility of partial or total loss of invested capital, due to the nature and volatility of the underlying investments; and are generally considered to be illiquid due to restrictive repurchase procedures. These investments may also involve different regulatory and reporting requirements, complex tax structures, and delays in distributing important tax information.
Among the risks presented by private equity investing are substantial commitment requirements, credit risk, lack of liquidity, fees associated with investing, lack of control over investments and or governance, investment risks, leverage and tax considerations. Private equity investments can also be affected by environmental conditions / events, political and economic developments, taxes and other government regulations.

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