Money For the Rest of Us

How to Invest in Private Credit / Direct Lending

Jan 29, 2025

Discover the intriguing world of private credit and direct lending, where companies are opting to stay private. Learn how this investment avenue contrasts with traditional leverage loans, and why it's on the rise. The discussion highlights the flexibility and direct connections to borrowers that private credit offers. Explore various investment opportunities, from business development companies to closed-end funds, as well as the risks tied to shifting interest rates. This is an insightful dive into a growing financial niche!

26:20

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Quick takeaways

Private credit is rapidly growing due to the decline in public companies, leading to an increased reliance on private financing and customized loan terms.

Investing in private credit offers various options, such as BDCs for liquidity or closed-end funds for stability, requiring careful consideration of individual investor needs.

Deep dives

Understanding Private Credit

Private credit, often referred to as direct lending, involves lending money directly to private companies by a single lender. This type of lending is distinct from the syndicated loan market, where loans are shared among multiple banks. With private credit, loans are generally kept on the lender's books and are not traded, resulting in a less regulated environment. This structure allows the lender to become deeply involved with the borrower's business, negotiating terms that align with both parties' interests and usually resulting in a higher interest rate for the borrower due to the added risk and illiquidity.

Intro

2min

The Shift from Syndicated Loans to Private Credit Direct Lending

7min

Exploring Investment Opportunities in Private Credit and Direct Lending

20min

We explore what private credit, or direct lending, is and how to invest in it. We also show how it is similar and different from investing in leverage loans and CLOs.

Topics covered include: