{"id":22740,"date":"2024-06-28T17:29:01","date_gmt":"2024-06-28T17:29:01","guid":{"rendered":"https:\/\/www.wallstreetzen.com\/blog\/?p=22740"},"modified":"2025-07-18T19:06:39","modified_gmt":"2025-07-18T19:06:39","slug":"what-is-private-credit","status":"publish","type":"post","link":"https:\/\/www.wallstreetzen.com\/blog\/what-is-private-credit\/","title":{"rendered":"What Is Private Credit? Ultimate Guide [Private Credit Funds &#038; How to Invest]"},"content":{"rendered":"\n<p>Forget the 60\/40 portfolio. More and more investors are seeking out a 40\/30\/30 allocation \u2014 featuring stocks, bonds, and alternatives such as <strong>real estate<\/strong>, <strong>infrastructure, <\/strong>and <strong>private credit&nbsp;assets. <\/strong><\/p>\n\n\n\n<p>Wait. What is private credit? <\/p>\n\n\n\n<p>If you found this blog post, then there\u2019s probably a lot you don\u2019t know about private credit (yet). Let\u2019s get up to speed. Below, I\u2019ll guide you through everything you need to know: <\/p>\n\n\n\n<ul>\n<li>What is private credit? <\/li>\n\n\n\n<li>What\u2019s are the pros and cons? <\/li>\n\n\n\n<li>How do you invest in private credit? <\/li>\n\n\n\n<li>And more.<\/li>\n<\/ul>\n\n\n\n<p>I even consulted experts from one of the best private credit investing platforms out there, <a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Percent<\/a>, to answer some of your most pressing questions. Let\u2019s go: <\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"1792\" height=\"1024\" src=\"https:\/\/www.wallstreetzen.com\/blog\/wp-content\/uploads\/2024\/10\/what-is-private-credit-investing-panoramic-image-depicting-the-concept-of-private-credit-investing.-The-scene-features-a-sleek-modern-financial-district-with-towering-glass-buildin.webp\" alt=\"\" class=\"wp-image-26369\" srcset=\"https:\/\/www.wallstreetzen.com\/blog\/wp-content\/uploads\/2024\/10\/what-is-private-credit-investing-panoramic-image-depicting-the-concept-of-private-credit-investing.-The-scene-features-a-sleek-modern-financial-district-with-towering-glass-buildin.webp 1792w, https:\/\/www.wallstreetzen.com\/blog\/wp-content\/uploads\/2024\/10\/what-is-private-credit-investing-panoramic-image-depicting-the-concept-of-private-credit-investing.-The-scene-features-a-sleek-modern-financial-district-with-towering-glass-buildin-768x439.webp 768w, https:\/\/www.wallstreetzen.com\/blog\/wp-content\/uploads\/2024\/10\/what-is-private-credit-investing-panoramic-image-depicting-the-concept-of-private-credit-investing.-The-scene-features-a-sleek-modern-financial-district-with-towering-glass-buildin-1536x878.webp 1536w\" sizes=\"(max-width: 1792px) 100vw, 1792px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h.7qlarch3oyh8\"><strong>What is Private Credit? <\/strong><\/h2>\n\n\n\n<p>In essence: Loans provided to businesses by non-banks. <\/p>\n\n\n\n<p>Who seeks out these private loans, and why? <br><br>Often, private credit borrowers are non-public, middle-market companies. (What\u2019s a middle-market company? The numbers can range depending on the source, but according to the U.S. Department of Commerce, that includes businesses with pre-taxed earnings anywhere between $5 million and $250 million.)<\/p>\n\n\n\n<p>In terms of securing financing, things can get mushy in the middle market. <\/p>\n\n\n\n<p>These companies need money to finance and grow their businesses. But borrowing can be tricky: <\/p>\n\n\n\n<ul>\n<li>Unlike public companies, they can\u2019t access public debt. <\/li>\n\n\n\n<li>Middle market businesses still feel the ripple effects of the 2007-2008 Great Financial Crisis, when a fresh wave of regulations made it challenging for these types of companies to secure financing from banks. <\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<p>Enter private credit. <\/p>\n\n\n\n<p>For many businesses, private credit can be the gateway to access the funds they need to uplevel their operations. These lenders are not subject to the same restrictions as bank lenders.<\/p>\n\n\n\n<p>They often offer customized loan structures, quicker access to funds, and more flexible terms. (Worth noting: Due to these advantages, some companies <em>prefer<\/em>&nbsp;private loans to traditional bank loans.)<\/p>\n\n\n<!-- This site is converting visitors into subscribers and customers with OptinMonster - https:\/\/optinmonster.com :: Campaign Title: Inline Blog Email Entry Form -->\n<div id=\"om-zsh4argjlqwzmvqljdff-holder\"><\/div>\n<script>(function(d,u,ac){var s=d.createElement('script');s.type='text\/javascript';s.src='https:\/\/a.omappapi.com\/app\/js\/api.min.js';s.async=true;s.dataset.user=u;s.dataset.campaign=ac;d.getElementsByTagName('head')[0].appendChild(s);})(document,78380,'zsh4argjlqwzmvqljdff');<\/script>\n<!-- \/ OptinMonster -->\n\n\n<h2 class=\"wp-block-heading\" id=\"h.noohj08p3wnx\"><strong>Is Private Credit Investing New? <\/strong><\/h2>\n\n\n\n<p>Nope, private credit investing isn\u2019t new. It\u2019s been around for decades, and the market has been growing exponentially. Case in point: Check out the chart below (courtesy <a href=\"https:\/\/www.blackrock.com\/institutions\/en-us\/insights\/the-growth-of-direct-lending\" target=\"_blank\" rel=\"noopener\">BlackRock<\/a>), detailing the global private credit market\u2019s ascent since 2000: <\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" src=\"https:\/\/www.wallstreetzen.com\/blog\/wp-content\/uploads\/2024\/06\/image4-4.png\" alt=\"Blackrock Chart on Private Credit Market\"\/><\/figure><\/div>\n\n\n<p>That chart ends in 2022. According to <a href=\"https:\/\/www.morganstanley.com\/ideas\/private-credit-outlook-considerations\" target=\"_blank\" rel=\"noopener\">Morgan Stanley<\/a>, the market had exceeded $1.5 trillion by early 2024 and is estimated to grow to $2.8 trillion by 2028. <\/p>\n\n\n\n<p>But as a retail investor, you might feel like private credit and private credit funds just popped on the scene overnight. There\u2019s a reason why \u2014 until recently, it was primarily an investment vehicle reserved for large, institutional investors. <\/p>\n\n\n\n<p><strong>To understand this progression, I consulted one of the most popular private credit investing platforms out there, <a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Percent<\/a>, for guidance.<\/strong> <\/p>\n\n\n    <div id=\"callout-box-block_a00373bd369d083a6c5764a74e5baa3c\" class=\"callout-box info\">\n        <div class=\"callout-box__icon-wrapper\">\n            <svg focusable=\"false\" class=\"callout-box__icon info\" viewBox=\"0 0 24 24\" aria-hidden=\"true\">\n                <path d=\"M12 3c-.46 0-.93.04-1.4.14-2.76.53-4.96 2.76-5.48 5.52-.48 2.61.48 5.01 2.22 6.56.43.38.66.91.66 1.47V19c0 1.1.9 2 2 2h.28c.35.6.98 1 1.72 1s1.38-.4 1.72-1H14c1.1 0 2-.9 2-2v-2.31c0-.55.22-1.09.64-1.46C18.09 13.95 19 12.08 19 10c0-3.87-3.13-7-7-7zm2 16h-4v-1h4v1zm0-2h-4v-1h4v1zm-1.5-5.59V14h-1v-2.59L9.67 9.59l.71-.71L12 10.5l1.62-1.62.71.71-1.83 1.82z\"><\/path>            <\/svg>\n        <\/div>\n        <div class=\"callout-box__content\"><p><strong>Why has private credit been so hard for retail investors to access?\u00a0<\/strong><\/p>\n<p><!-- wp:paragraph --><\/p>\n<p>According to Percent\u2019s Investor Relations team, \u201c<em>While private credit has been growing with institutional investors, it\u2019s been hard for retail investors to access.<\/em><\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p><em>That\u2019s because these opportunities are typically privately negotiated with substantial investment minimums, long periods of illiquidity, and are managed by large funds and asset managers that don\u2019t allow smaller individual investors.<\/em><\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p><em>Additionally, even when retail investors did get access to invest in private credit opportunities, they also encountered difficulties assessing quality of transactions, performing proper due diligence, and lack of transparency and standardization across deals, making it harder for them to finally invest.\u201d<\/em><\/p>\n<p><!-- \/wp:paragraph --><\/p>\n<\/div>\n    <\/div>\n\n\n\n<p><\/p>\n\n\n\n<p>Wider adoption is starting to happen, largely thanks to pioneering platforms like <a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Percent<\/a>. But even as private credit gains a larger audience, there are still some common misconceptions about private credit investing \u2014 so let\u2019s clear those up now. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h.vois7ioalg8k\"><strong>Common Misconceptions About Private Credit<\/strong><\/h2>\n\n\n\n<p>As Percent\u2019s team shares, there are two primary misconceptions about private credit: First, that you need a lot of cash, and second, that it\u2019s only for professionals. Let\u2019s do a little myth-busting:<\/p>\n\n\n    <div id=\"callout-box-block_1a447eae0636d1e3c9b5a17645da103b\" class=\"callout-box info\">\n        <div class=\"callout-box__icon-wrapper\">\n            <svg focusable=\"false\" class=\"callout-box__icon info\" viewBox=\"0 0 24 24\" aria-hidden=\"true\">\n                <path d=\"M12 3c-.46 0-.93.04-1.4.14-2.76.53-4.96 2.76-5.48 5.52-.48 2.61.48 5.01 2.22 6.56.43.38.66.91.66 1.47V19c0 1.1.9 2 2 2h.28c.35.6.98 1 1.72 1s1.38-.4 1.72-1H14c1.1 0 2-.9 2-2v-2.31c0-.55.22-1.09.64-1.46C18.09 13.95 19 12.08 19 10c0-3.87-3.13-7-7-7zm2 16h-4v-1h4v1zm0-2h-4v-1h4v1zm-1.5-5.59V14h-1v-2.59L9.67 9.59l.71-.71L12 10.5l1.62-1.62.71.71-1.83 1.82z\"><\/path>            <\/svg>\n        <\/div>\n        <div class=\"callout-box__content\"><p><!-- wp:heading {\"level\":4,\"className\":\"wp-block-heading\"} --><\/p>\n<h4 id=\"h.fr1g8icbzyof\" class=\"wp-block-heading\"><strong>Misconception 1: You Need a Lot of Cash to Invest <\/strong><\/h4>\n<p><!-- \/wp:heading --> <!-- wp:paragraph --><\/p>\n<p>According to the Percent team, \u201c<em>One common misconception is that you need a lot of cash to invest in private credit. While that may have been true for this opaque asset class in the past, Percent makes it possible with deals with lower minimums for accredited retail investors. <\/em><\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p><em>The lowest minimum deal we have on our platform requires only $500 to invest. This makes it realistic for everyday investors to build a private credit portfolio of their own.\u201d<\/em><\/p>\n<p><!-- \/wp:paragraph --><\/p>\n<\/div>\n    <\/div>\n\n\n    <div id=\"callout-box-block_a9d3c0ab291a6a6c8f902c9ba51a8c78\" class=\"callout-box info\">\n        <div class=\"callout-box__icon-wrapper\">\n            <svg focusable=\"false\" class=\"callout-box__icon info\" viewBox=\"0 0 24 24\" aria-hidden=\"true\">\n                <path d=\"M12 3c-.46 0-.93.04-1.4.14-2.76.53-4.96 2.76-5.48 5.52-.48 2.61.48 5.01 2.22 6.56.43.38.66.91.66 1.47V19c0 1.1.9 2 2 2h.28c.35.6.98 1 1.72 1s1.38-.4 1.72-1H14c1.1 0 2-.9 2-2v-2.31c0-.55.22-1.09.64-1.46C18.09 13.95 19 12.08 19 10c0-3.87-3.13-7-7-7zm2 16h-4v-1h4v1zm0-2h-4v-1h4v1zm-1.5-5.59V14h-1v-2.59L9.67 9.59l.71-.71L12 10.5l1.62-1.62.71.71-1.83 1.82z\"><\/path>            <\/svg>\n        <\/div>\n        <div class=\"callout-box__content\"><p><!-- wp:paragraph --><\/p>\n<p><strong>Misconception 2: You Need to Be a Pro <\/strong><\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p>Not necessarily. As the Percent Team shares, \u201c<em>Another misconception is that the average investor can\u2019t benefit from private credit and that it\u2019s designed more for large institutional investors.<\/em><\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p><em>However, because private credit is significantly less correlated to public markets, it can be a useful hedge in a portfolio against market downturns and volatility.<\/em><\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p><em>Compared to a portfolio of just stocks and bonds, reallocating 10% of a traditional equity and fixed income portfolio to private credit would have reduced volatility and increased returns historically (<a href=\"https:\/\/www.troweprice.com\/content\/dam\/trp-sites\/cobrand\/oha\/files\/Intro_to_Private_Credit_White_Paper.pdf\" target=\"_blank\" rel=\"noopener\">T. Rowe Price<\/a>).\u201d<\/em><\/p>\n<p><!-- \/wp:paragraph --><\/p>\n<\/div>\n    <\/div>\n\n\n\n<p>With these misconceptions out of the way, you might be wondering: Is a 40\/30\/30 portfolio featuring private credit right for you? First, a little context&#8230;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h.mu5v13qlp010\"><strong>Is a 40\/30\/30 Portfolio (Including Private Credit) Right For You?<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-pullquote\"><blockquote><p><em>[The 40\/30\/30 portfolio] model can provide higher returns and lower volatility, especially during periods of inflation or general market uncertainty. It is particularly suited for investors seeking to diversify their portfolios beyond public equities and bonds, looking for uncorrelated returns and enhanced yield.<\/em><\/p><cite>&#8211; Percent Investor Relations Team<\/cite><\/blockquote><\/figure>\n\n\n\n<p>According to a recent <a href=\"https:\/\/www.kkr.com\/sites\/default\/files\/2022-December-Regime-Change-Private-Credit.pdf\" target=\"_blank\" rel=\"noopener\">study<\/a>&nbsp;by investment giant KKR, the classic 60\/40 (stocks\/bonds) allocation could leave potential returns on the table. They found that a <strong>40\/30\/30 portfolio<\/strong> (stocks\/bonds\/alternative assets) &#8230; Offered both <em><strong>higher returns<\/strong><\/em>&nbsp;and <em><strong>lower volatility<\/strong><\/em>&nbsp;during periods of high inflation. <\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" src=\"https:\/\/www.wallstreetzen.com\/blog\/wp-content\/uploads\/2024\/06\/image2-4.png\" alt=\"Image2\"\/><\/a><\/figure><\/div>\n\n\n<p><strong>Once again, I consulted Percent for their thoughts<\/strong> on the 40\/30\/30 allocation. Here&#8217;s what they had to say: <\/p>\n\n\n    <div id=\"callout-box-block_03685bb600cd3e0403fcb32f7b8c748f\" class=\"callout-box info\">\n        <div class=\"callout-box__icon-wrapper\">\n            <svg focusable=\"false\" class=\"callout-box__icon info\" viewBox=\"0 0 24 24\" aria-hidden=\"true\">\n                <path d=\"M12 3c-.46 0-.93.04-1.4.14-2.76.53-4.96 2.76-5.48 5.52-.48 2.61.48 5.01 2.22 6.56.43.38.66.91.66 1.47V19c0 1.1.9 2 2 2h.28c.35.6.98 1 1.72 1s1.38-.4 1.72-1H14c1.1 0 2-.9 2-2v-2.31c0-.55.22-1.09.64-1.46C18.09 13.95 19 12.08 19 10c0-3.87-3.13-7-7-7zm2 16h-4v-1h4v1zm0-2h-4v-1h4v1zm-1.5-5.59V14h-1v-2.59L9.67 9.59l.71-.71L12 10.5l1.62-1.62.71.71-1.83 1.82z\"><\/path>            <\/svg>\n        <\/div>\n        <div class=\"callout-box__content\"><p><strong>What&#8217;s so great about a 40\/30\/30 portfolio including private credit investments?\u00a0<\/strong><\/p>\n<p>According to Percent&#8217;s Investor Relations team, \u201c<em>The 40\/30\/30 portfolio model, which includes allocations to real estate, infrastructure, and private credit assets, offers a compelling alternative to the traditional 60\/40 portfolio. <\/em><\/p>\n<p><!-- wp:paragraph --><\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p><em>This model can provide higher returns and lower volatility, especially during periods of inflation or general market uncertainty. It is particularly suited for investors seeking to diversify their portfolios beyond public equities and bonds, looking for uncorrelated returns and enhanced yield. <\/em><\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p><em>Given the evolving economic landscape, where traditional asset classes face challenges, incorporating alternatives like private credit can be a strategic move to achieve better risk-adjusted returns through the ups and downs of the market.<\/em><\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p><em>We believe this model represents the direction of the future, as more investors recognize the benefits of a diversified and balanced approach that includes private market assets\u200b\u200b\u200b\u200b\u200b\u200b.\u201d<\/em><\/p>\n<p><!-- \/wp:paragraph --><\/p>\n<\/div>\n    <\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h.yis0xumnb5ld\"><strong>Pros + Cons of Investing in Private Credit <\/strong><\/h2>\n\n\n\n<p>Still on the fence? Let\u2019s dig into the specific advantages and disadvantages of private credit investing:<\/p>\n\n\n\n<h4><strong>1. Potentially Higher Yields<\/strong><\/h4>\n\n\n\n<p>What types of returns might you be looking at with private credit investments? I took a look at <a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Percent<\/a>&#8216;s historical track record to get an idea.<\/p>\n\n\n\n<p>As of May 31, 2024, Percent reports a current weighted average APY of 18.27% and a historical weighted average APY is 13.72% (based on matured deals). (<a href=\"https:\/\/percent.com\/our-track-record-of-performance\/\" target=\"_blank\" rel=\"noopener\">Click here<\/a>&nbsp;for the most up-to-date info on Percent\u2019s performance.)<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" src=\"https:\/\/www.wallstreetzen.com\/blog\/wp-content\/uploads\/2024\/06\/image3-4.png\" alt=\"Image3\"\/><\/a><\/figure><\/div>\n\n\n<p>That sounds impressive, but how about a point of comparison? Let\u2019s look at how junk bonds, or high-yield \/ higher risk bonds with a&nbsp;rating of BBB or lower, are doing:<\/p>\n\n\n\n<ul>\n<li>The SPDR Portfolio High Yield Bond ETF (SPHY) is currently yielding 7.75%.<\/li>\n\n\n\n<li>iShares Inflation Hedged High Yield Bond ETF (HYGI) currently pays 6.22%.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<h4><strong>2. Favorable Market Conditions<\/strong><\/h4>\n\n\n\n<p>As you may have noticed, the Fed was on an interest-raising frenzy in 2023, and the \u201cwill they or won\u2019t they\u201d conversation about rate cuts is ongoing. This shift in policy had a destabilizing effect on the market and increased strain system-wide. <\/p>\n\n\n\n<p>However, this created a very attractive setting for private credit investments. During times like these, when businesses borrow money \u2014 particularly in the short term \u2014 they are forced to do so at high rates, which is a good thing for investors, since high interest rates often mean borrowers are borrowing at lower leverage, which can reduce risk. Speaking of reducing risk\u2026<\/p>\n\n\n\n<h4><strong>3. Lower Correlation With Public Markets<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-heading\">Private credit investments tend to have lower volatility than public markets (like stocks and bonds).<\/p>\n\n\n\n<p class=\"wp-block-heading\">One reason why? The direct lending market tends to focus on resilient industries that are not as susceptible to economic volatility \u2014 for example, business services, healthcare, and IT. All of these industries tend to have more cash flow stability and have less sensitivity to shifts in the larger U.S. economy. <\/p>\n\n\n\n<p class=\"wp-block-heading\">Additionally, with a platform like <a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Percent<\/a>, many of the loans are backed by assets, corporate debt, or loan portfolios.<\/p>\n\n\n\n<h4><strong>4. Potentially Low Default Rates<\/strong><\/h4>\n\n\n\n<p>You know that past performance is no guarantee of future performance. That said, a good track record speaks volumes. <\/p>\n\n\n\n<p>Since 2018, Percent\u2019s loss rate (losses based on defaults) is 1.35%. Compare that to the high-yield market, which experiences default rates in the 3.6% range. (<a href=\"https:\/\/www.harbourvest.com\/insights-news\/insights\/the-case-for-private-credit-after-a-reset-in-the-public-markets\/\" target=\"_blank\" rel=\"noopener\">Source<\/a>)<\/p>\n\n\n\n<p>Once again, this could be thanks to the magic of middle-market companies. The companies typically securing private credit aren\u2019t newbies: they\u2019ve established themselves to the point when they want to scale and grow \u2014 a good indication that they\u2019re doing something right.<\/p>\n\n\n\n<h4><strong>5. Short <\/strong>to Medium<strong>-Term Investments<\/strong><\/h4>\n\n\n\n<p>One of the nice things about private credit investment is that it doesn&#8217;t have to lock you in for years and years. For example, in 2023, <a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Percent<\/a>\u2019s average term length of an investment was 9 months; deals are typically 6 to 36 months.<\/p>\n\n\n\n<p>The shorter investment term also diminishes interest rate risk. Here\u2019s why. Interest rate risk involves the decline in the value of longer-term bonds when interest rates rise. As new bonds are issued with higher yields, the prices of existing bonds decrease. Bonds with shorter maturity dates are less susceptible to this risk.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h.pfv4335v1sz3\"><strong>Cons of Investing in Private Credit <\/strong><\/h4>\n\n\n\n<p>While the benefits of private credit investing are many, there are some potential disadvantages you should be aware of: <\/p>\n\n\n\n<p><strong>Lack of liquidity:<\/strong>&nbsp;While the terms for private credit investments are typically short, your money is often locked up for the duration of the investment. There isn\u2019t an established secondary market for private credit, so if you invest, you\u2019re in it for the duration of the loan or investment period. <\/p>\n\n\n\n<p><strong>Opaque market: <\/strong>Remember when I said earlier that private credit isn\u2019t subject to some of the same regulations as public lending? This means there might not be a lot of publicly available information on the companies you\u2019re lending to. This makes it all the more important to invest through a trustworthy platform that will do some due diligence on your behalf. <\/p>\n\n\n\n<p><strong>Complicated loan structures: <\/strong>Private credit loans can be customized to the business, but this means that they can be hard to understand because every loan will have its own set of rules. Either you\u2019ll need to read the fine print or trust that your private credit investing platform is doing it for you. <\/p>\n\n\n\n<p><strong>Potentially high minimums: <\/strong>As noted earlier, the barrier to entry historically has been that private credit offerings are typically offered in large sums, to institutional investors. Platforms like <a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Percent<\/a>&nbsp;are changing and simplifying this by allowing you to invest with just $500. <\/p>\n\n\n\n<p>As you\u2019ve probably gathered by now, I\u2019m a fan of Percent because it simplifies some of these disadvantages for you. With that in mind, let\u2019s get to what you really want to know about now: <\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h.lyzlnmbhn0i8\"><strong>How Can I Invest in Private Credit? <\/strong><\/h2>\n\n\n\n<p>As you may have inferred, WallStreetZen recommends Percent for private credit investing. If you\u2019ve considered the pros and cons and decided to add private credit to your portfolio, follow these steps:<\/p>\n\n\n\n<ol>\n<li><strong>Learn about private credit and private credit funds. <\/strong>You\u2019re reading this blog post, so you\u2019re already on top of this. &nbsp;<\/li>\n\n\n\n<li><strong>Think about how much you want to invest<\/strong>: Revisiting that KKR study, the suggestion is that high-net-worth individuals invest up to 30% in alternative assets, 10% of which is private credit. But remember, that\u2019s just one benchmark \u2014 your allocation is your decision. <\/li>\n\n\n\n<li><strong>Choose an investment platform: <\/strong>I strongly suggest signing up with a platform like Percent for private credit investing. I\u2019ll share why below \u2014 you can also check out our <a href=\"https:\/\/www.wallstreetzen.com\/blog\/percent-review\/\" target=\"_blank\" rel=\"noopener\">Percent review<\/a>&nbsp;for more details. <\/li>\n\n\n\n<li><strong>Research potential investments<\/strong>: Once you\u2019ve chosen a platform, browse the available deals and look for one that aligns with your goals. <\/li>\n\n\n\n<li><strong>Invest!<\/strong><\/li>\n<\/ol>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h.5yapoz5tse9f\"><strong>Why We Like Percent for Private Credit Investing<\/strong><\/h2>\n\n\n\n<p><a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Percent<\/a>&nbsp;is considered a pioneer in the world of private credit investing \u2014 and one of the best platforms out there for this type of investing. Here\u2019s why: <\/p>\n\n\n\n<ul>\n<li><strong>Private credit focused: <\/strong>Unlike other platforms, private credit isn\u2019t one of a basket of assets for Percent. It\u2019s the main event. <\/li>\n\n\n\n<li><strong>Strong track record: <\/strong>As of May 31, 2024, Percent reports a current weighted average APY of 18.27%. Its historical weighted average APY is 13.72% (based on matured deals). &nbsp;<\/li>\n\n\n\n<li><strong>Find investments that suit you: <\/strong>On the platform, you can specify your desired yield and minimum investment amount during syndication. Only invest if your parameters are met.<\/li>\n\n\n\n<li><strong>Transparency: <\/strong>As noted above, private credit can be an opaque world. Percent does a great job of making things transparent. You can see and compare available deals up front. You can access comprehensive borrower, deal and market data. <\/li>\n\n\n\n<li><strong>Tracking abilities: <\/strong>On Percent, you can track performance and use surveillance reports to keep informed at every step.<\/li>\n<\/ul>\n\n\n\n<div class=\"is-layout-flex wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Check out Percent<\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<p>Plus, Percent isn\u2019t done pioneering \u2014 there are some exciting things on the horizon. When I asked about their hopes for the future of private credit investing, they stated a commitment to continued innovation and making private credit investing even more accessible to more investors:<\/p>\n\n\n\n<p>&#8220;<em>We envision a future where private credit investing becomes more democratized and accessible to a broader range of investors.<\/em><\/p>\n\n\n\n<p><em>By leveraging technology and innovative financial products, like our Percent Blended Notes (PBNs), we aim to simplify the investment process, provide greater transparency, and offer diversified, high-yield opportunities.<\/em><\/p>\n\n\n\n<p><em>Our goal is to continue bridging the gap between public and private debt markets, enabling more investors to benefit from the attractive returns and diversification that private credit can offer\u200b\u200b\u200b\u200b.<\/em>&#8220;<\/p>\n\n\n    <div id=\"callout-box-block_49aa018202952977463c9ac8752b2fef\" class=\"callout-box info\">\n        <div class=\"callout-box__icon-wrapper\">\n            <svg focusable=\"false\" class=\"callout-box__icon info\" viewBox=\"0 0 24 24\" aria-hidden=\"true\">\n                <path d=\"M12 3c-.46 0-.93.04-1.4.14-2.76.53-4.96 2.76-5.48 5.52-.48 2.61.48 5.01 2.22 6.56.43.38.66.91.66 1.47V19c0 1.1.9 2 2 2h.28c.35.6.98 1 1.72 1s1.38-.4 1.72-1H14c1.1 0 2-.9 2-2v-2.31c0-.55.22-1.09.64-1.46C18.09 13.95 19 12.08 19 10c0-3.87-3.13-7-7-7zm2 16h-4v-1h4v1zm0-2h-4v-1h4v1zm-1.5-5.59V14h-1v-2.59L9.67 9.59l.71-.71L12 10.5l1.62-1.62.71.71-1.83 1.82z\"><\/path>            <\/svg>\n        <\/div>\n        <div class=\"callout-box__content\"><p><strong data-rich-text-format-boundary=\"true\">What is Accredited Investor Status?<\/strong><\/p>\n<p><!-- wp:paragraph --><\/p>\n<p>As noted earlier, <a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Percent<\/a>\u00a0is only available to accredited investors. They hope to open up the platform to non-accredited investors soon, but for now that\u2019s the way it is.<\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p>In case you\u2019re unfamiliar, these are the standards to qualify as an accredited investor<\/p>\n<ol>\n<li><span style=\"font-size: 16px;\">You have an annual income of $200,000 individually or $300,000 jointly.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Your net worth exceeds $1 million, excluding your primary residence.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">You meet certain professional standards. <\/span><span style=\"font-size: 16px;\">(For more information, check out our post on <\/span><a style=\"font-size: 16px;\" href=\"https:\/\/www.wallstreetzen.com\/blog\/how-to-become-an-accredited-investor\/\" target=\"_blank\" rel=\"noopener\">how to become an accredited investor<\/a><span style=\"font-size: 16px;\">.)<\/span><\/li>\n<\/ol>\n<p><!-- \/wp:list-item --><\/p>\n<p><!-- \/wp:paragraph --> <!-- wp:paragraph --><\/p>\n<p>If you do qualify, you can get started with <a href=\"https:\/\/www.wallstreetzen.com\/go\/percent\" target=\"_blank\" rel=\"noopener\">Percent<\/a> today. (You can also invest in a lot of other cool stuff, too \u2014 check out our guide to the <a href=\"https:\/\/www.wallstreetzen.com\/blog\/best-investments-for-accredited-investors\/\" target=\"_blank\" rel=\"noopener\">best accredited investor investments<\/a>.) But don\u2019t worry \u2014 even if you\u2019re not accredited, there are options for gaining private credit exposure. Let\u2019s look at a few.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n<\/div>\n    <\/div>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h.fvxy382cel27\"><strong>Non-Accredited Investors: Ways to Invest<\/strong> <\/h2>\n\n\n\n<p>If you&#8217;re not an accredited investor but want to invest in private credit funds, here are two to consider:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h.rjyru2ia6vn4\"><strong>Yieldstreet&#8217;s Alternative Income Fund<\/strong><\/h4>\n\n\n\n<p>Yieldstreet also offers private credit investing for accredited investors, but we\u2019re focusing on non-accredited investors here, so we\u2019ll zero in on the Alternative Income Fund, which doesn\u2019t require accreditation.<\/p>\n\n\n\n<p>Formerly known as the Yieldstreet Prism Fund, this isn\u2019t a pure private credit investment. Rather, it\u2019s a fund that invests in a variety of private market investments, including private credit, that delivers quarterly income. Here\u2019s a peek at the fund\u2019s performance: <\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" src=\"https:\/\/www.wallstreetzen.com\/blog\/wp-content\/uploads\/2024\/06\/image1-4.png\" alt=\"Image1\"\/><\/figure><\/div>\n\n\n<p>The site reports a net annualized yield of 8.1% and AUM of $145 million as of 3\/31\/2024. <\/p>\n\n\n\n<p>If you\u2019re interested in gaining some exposure to private credit and like the idea of diversifying into other private markets, it might be appealing.<\/p>\n\n\n\n<div class=\"is-layout-flex wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-white-color has-text-color has-background wp-element-button\" href=\"https:\/\/www.wallstreetzen.com\/go\/yieldstreet\" style=\"background-color:#446bca\" target=\"_blank\" rel=\"noopener\"><strong>Check out Yieldstreet\u2019s Alternative Income Fund<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h.555nis7lz0oo\"><strong>Fundrise <\/strong><\/h4>\n\n\n\n<p>Investment platform Fundrise offers several investment plans that you can choose based on your personal objectives as an investor. The catch? At this time, there is not a plan that allows you to invest solely in private credit \u2014 their \u201cSupplemental\u201d Plan is mostly a private credit fund, but includes some real estate too.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><a href=\"https:\/\/www.wallstreetzen.com\/go\/fundrise\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" src=\"https:\/\/www.wallstreetzen.com\/blog\/wp-content\/uploads\/2024\/06\/image5-4.png\" alt=\"Image5\"\/><\/a><\/figure><\/div>\n\n\n<p>The goal of Fundrise\u2019s \u201cSupplemental\u201d plan is to \u201ccapitalize on the changed economic environment, offering some of the most attractive potential risk-adjusted returns of the past decade\u201d by providing rescue capital to high-quality borrowers. &nbsp;<\/p>\n\n\n\n<p>While you have less selection and control than you would with a platform like Percent, if you feel comfortable with the platform doing the decision-making for you, it\u2019s a great way to enter the world of private credit investing for an accessible starting point. <\/p>\n\n\n\n<div class=\"is-layout-flex wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-white-color has-text-color has-background wp-element-button\" href=\"https:\/\/www.wallstreetzen.com\/go\/fundrise\" style=\"background-color:#446bca\" target=\"_blank\" rel=\"noopener\"><strong>Check out Fundrise<\/strong><\/a><\/div>\n<\/div>\n\n\n<div class=\"wp-block-code-snippets-content\"><div class=\"disclaimer\">\r\n\t<p>Note: We earn a commission for this endorsement of Fundrise. <\/p>\r\n<\/div><\/div>\n\n\n<h2 class=\"wp-block-heading\" id=\"h.3rvzb2nzokur\"><strong>The Bottom Line<\/strong> <\/h2>\n\n\n\n<p>So, should you invest in private credit? <\/p>\n\n\n\n<p>That\u2019s a personal decision. Personally, I believe in private credit investing and I am a private credit investor myself. Here\u2019s why: <\/p>\n\n\n\n<ul>\n<li>I see the potential in the middle market, which represents a massive chunk of the U.S. economy, and I respect the fact that these are established companies that are less likely than startups to default on loans. <\/li>\n\n\n\n<li>Platforms like Percent for accredited investors, and Fundrise for non-accredited investors, make private credit accessible to a wider audience of individual investors while also adding a layer of legitimacy so you don\u2019t have to seek out the deals yourself.<\/li>\n\n\n\n<li>The market has been growing exponentially; it\u2019s gone from the millions to trillions in the past 2 decades or so. <\/li>\n\n\n\n<li>The short time horizons on platforms like Percent allow exposure without locking up money for years and years.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<p>Those are the reasons I like private credit. But your investment decisions are your own.<\/p>\n\n\n\n<p>That said, if you do decide to invest in private credit, I strongly recommend going with a well-reviewed, trustworthy platform with a proven track record. I\u2019ve mentioned Percent, Yieldstreet, and Fundrise today \u2014 all platforms with great reviews, a ton of happy users, and proven track records.<\/p>\n\n\n\n<p>But remember: Alternative investments are speculative and possess a high level of risk. No assurance can be given that investors will receive a return of their capital. Those investors who cannot afford to lose their entire investment should not invest. Investments in private placements are highly illiquid and those investors who cannot hold an investment for an indefinite term should not invest.<\/p>\n\n\n\n<p>Private credit investments may be complex investments and they are subject to default risk. <\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n\t\t<div class=\"wp-faq-schema-wrap\">\n\t\t\t\t\t\t\t<h2>FAQs:<\/h2>\n\t\t\t\t\t\t<div class=\"wp-faq-schema-items\">\n\t\t\t\t\t\t\t\t\t<h3>What is the difference between private credit and public credit?<\/h3>\n\t\t\t\t\t<div class=\"\">\n\t\t\t\t\t\t<p>The main difference between private credit and public credit is who is borrowing and who is funding. Private credit primarily serves middle-market, non-public companies. Public credit borrowers are typically public companies or government entities. <\/p>\n<p>In general, the public market is more accessible, has more liquidity, more regulation (and therefore more transparency) and a larger pool of investors.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t<h3>What is a private credit fund?<\/h3>\n\t\t\t\t\t<div class=\"\">\n\t\t\t\t\t\t<p>A private credit fund pools money from multiple investors to invest in private credit deals. These funds are managed by professional investors who handle the sourcing, analysis, and management of all investments on behalf of their investors. Every investment fund has unique objectives, so make sure they're aligned with your goals before investing.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t<h3>Are private credit and private debt the same thing?<\/h3>\n\t\t\t\t\t<div class=\"\">\n\t\t\t\t\t\t<p>Yes. Private credit and private debt are the same thing.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\n","protected":false},"excerpt":{"rendered":"<p>Forget the 60\/40 portfolio. More and more investors are seeking out a 40\/30\/30 allocation \u2014 featuring stocks, bonds, and alternatives such as real estate, infrastructure, and private credit&nbsp;assets. Wait. What is private credit? If you found this blog post, then there\u2019s probably a lot you don\u2019t know about private credit (yet). Let\u2019s get up to [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":26369,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false},"categories":[23],"tags":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Is Private Credit? 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