Understanding the Stability of Private Credit

Private credit offers stability and attractive returns due to its structure as a floating rate asset with short duration, self-structured and self-negotiated terms. The components of return include upfront fees, base rate, credit spread, and call protection. When interest rates rise, credit spreads moderate, while in a declining rate environment, credit spreads widen. Historical data shows that private credit delivers a stable total return to investors even during rate decreases, as the wider credit spreads compensate for reduced base rates, ensuring durability in returns.