BlackRock predicts it will grow by over 100% in the next five years. Morgan Stanley says it’ll reach $2.7 trillion by 2027. Even financial advisors are incorporating it en masse into their arsenal of securities. Private credit is experiencing an unprecedented surge that could pay dividends for your portfolio if you seize the moment. One private credit platform is dedicated to making private credit accessible, with deals starting at just $500. The only catch for individual investors is that they do need to be accredited to invest.
Direct Lending Is Stealing The Spotlight
Investing in private credit essentially means lending money to companies. Unlike most bank loans, private loans can be tailored to the borrowers’ needs in terms of size, type, and maturity date. The most affluent individuals, as well as institutional heavyweights, have long favored private credit for its attractive yields paired with lower correlation to public bonds and markets.. In the current high-interest rate era, they have continued to attract investment for their return potential and resistance against volatility.
The size of the private credit market has almost doubled in the last three years. In 2020, it stood at $875 billion but soared to $1.4 trillion by 2023. Analysts from Morgan Stanley predict it will maintain this pace for years. If you’d like to get in on the action, Percent’s private credit platform is one of the easiest ways to gain exposure.
Private credit has historically been more resilient during downturns, with lower drawdowns than equities or high-yield bonds.
Private credit has shown resilience during downturns, with lower drawdowns than equities or high-yield bonds. For example, during the 2008 financial crisis, private credit experienced drawdowns of around 5-10%, while equities fell by over 50% and high-yield bonds by more than 30%. Similarly, during the COVID-19 downturn in 2020, private credit drawdowns were around 7%, compared to a 34% drop in equities and a 20% decline in high-yield bonds. This stability is due to its secured nature and strong creditor protections.
Diversification With Private Credit: Historical Performance and Expectations
Percent is a platform that connects investors with private credit opportunities across multiple geos, industries and lending types. Deals can offer investors potential returns of up to 20%, and historical performance on deals is updated each month on Percent's Performance page. Their marketplace offers a wide array of different loans, allowing investors to choose their investments according to desired yield, maturity, deal size and type of lending. It also offers detailed borrower profiles, deal comparison information and transparency into past deals to help investors more easily understand conduct due diligence and determine if an investment is right for them.
For accredited investors that are interested in diversifying their portfolio with alternatives, private credit presents an interesting and attractive opportunity. Research from T.Rowe Price indicates that allocating 10% of a portfolio to private credit has historically increased returns and reduced volatility. “A private credit allocation is also less correlated to traditional asset classes and offers a diversifying source of return driven by current income.”(T.Rowe Price).
For more information, you can create an account on Percent to view current private credit offerings.
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