February 23, 2024Private Credit: Characteristics and Risks1Fang Cai, and Sharjil HaqueWhat is Private Credit? Private credit or private debt investments are debt-like, non-publicly traded instruments provided by non-bank entities, such as private credit funds or business development companies (BDCs), to fund private businesses.2 Private credit is typically extended to middle-market firms with annual revenues between $10 million and $1 billion, but has grown rapidly in recent years to fund larger companies that were traditionally funded by leveraged loans. Market Size and Recent Growth of Private Credit and Direct LendingFigure 1 reports the growth of private credit since 2000, including all private credit strategies (left panel) and direct lending only (right panel). Top 20 Private Debt ManagersCharacteristics of Private Credit using Loan-level DataAs private credit continues to grow rapidly as a new frontier for nonbank lending, the scarcity of available data has made it challenging to assess risks in this market. This section discusses some key characteristics of private credit loans, based on a new sample of around 17,000 unique private credit loans originated by 718 private debt funds and BDCs from Pitchbook, where both borrowers and private debt lenders are U.S.-based.

Source: Wall Street Journal February 23, 2024 18:08 UTC