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Private credit has become a core allocation in many institutional portfolios and the private wealth channel is now starting to recognize the benefits of its potential yield orientation, risk mitigation and diversification benefits. Aksia is an institutional consultant, specializing in building PE, PC and HF portfolios for public and private pension plans, foundations and endowments, sovereign wealth funds, insurance companies and family offices. Tod is a Managing Director on the Investment Research team and has over 25 years of industry experience.
What is private credit?
Private credit refers to a variety of strategies sourced through private channels that focus on generating cash yield through (typically) secured debt instruments (or debt-like instruments, such as leases). Private credit assets are generally senior in a capital structure, potentially insulating investors’ principal from significant losses in times of economic stress and market dislocations.
Why invest in private credit?
Private credit offers a wide array of sub-strategies that are defensive and can take advantage of rising rates, market volatility and economic weakness. Institutions have long recognized and benefited from use of the private credit asset class. Asset owners such as public and corporate pension plans, insurance companies, foundations and endowments use private credit in their portfolios to generate current income, seek downside risk mitigation and take aim at volatility.
Private credit in an interval fund format – what are the tradeoffs?
Interval funds seek to offer private wealth and smaller institutions access to institutional quality private credit opportunities. An interval fund can allow private investors a “one stop” private credit solution to help diversify their existing portfolios, dampen vol and generate yield.
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