Private credit—also referred to as private debt—describes debt financing provided by non-bank institutions, such as private debt funds, pension funds, life insurance companies, and sovereign wealth funds.

Unlike traditional bank loans or publicly traded bonds, private debt involves negotiated, non-traded credit agreements between borrower and lender. This flexibility allows issuers to structure tailored terms around interest rates, covenants, and repayment schedules, making it an attractive option for borrowers with bespoke capital needs.

Common strategies within private debt include:

• Direct lending: Senior or unitranche loans made directly to mid-market companies, typically to fund buyouts, expansions, or recapitalisations.

• Mezzanine finance: Subordinated debt that sits between senior loans and equity, often used to bridge funding gaps in leveraged buyouts.

• Distressed debt: Investments in the debt of companies facing financial difficulty or insolvency, with the aim of achieving returns through restructuring, turnaround, or control via credit.

• Venture debt: Debt financing provided to early-stage, high-growth companies, typically alongside venture capital equity rounds.

• Real estate private credit: Debt secured by real estate assets, including senior mortgages, subordinated loans, and development finance. Investors earn returns through interest payments and collateral-backed structures.

• Asset-backed financing: Loans secured against physical or financial assets such as equipment, receivables, or inventory.

• Private debt may also take the form of privately placed corporate bonds, which are not traded on public markets but arranged directly with institutional investors.

As institutional demand for yield and diversification has grown, private debt has become one of the fastest-growing segments of the alternative investment universe, second only to private equity and venture capital by volume.