Private Debt

Private debt investments provide steady income through direct loans to businesses, offering stable, risk-adjusted returns compared to traditional bonds.

What is Private Debt?

Private debt (often called private credit) refers to loans and debt financing provided through private channels rather than public markets. In practice, non-bank lenders (like private funds, insurance companies, or asset managers) extend credit directly to borrowers, and these debt instruments are not issued or traded on public exchanges​.

This contrasts with public debt such as corporate or government bonds, which are publicly issued and traded. Private loans are typically privately negotiated transactions, allowing customized terms to fit a borrower’s needs without the regulatory and disclosure requirements of public markets.

Why consider Private Debt for your portfolios?

Structured to provide regular interest payments – at higher rates than traditional public debt instruments – which can be attractive to investors looking for steady cash flows. Private loans avoid the noise of traditional fixed income markets, exhibiting materially lower volatility.

Private debt provides diversification benefits due to its low correlation with traditional asset classes. The performance of private loans is tied to idiosyncratic borrower outcomes and contractual interest payments, rather than daily market sentiment.

Many private debt strategies emphasize capital preservation by investing at the top of the capital stack. Direct lending, for example, typically involves senior secured loans, which are first in line for repayment. when executed prudently, private debt offers a way to earn enhanced yield while maintaining structural protections that cushion against losses.

Direct lending can be a strong source of stable income

Annual income return, 2005 to 2024 Data as of June 30, 2025. Source: Cliffwater, Bloomberg, Westcourt analysis. For illustrative purposes only. Past results do not guarantee future performance.

Direct lending has experienced lower correlation against major public asset classes

Correlation of direct lending to public assets, Q4 2004 to Q2 2025 Data as of June 30, 2025. Source: Cliffwater, Bloomberg, Westcourt analysis. Note: Global Equities is represented by MSCI World Net Total Return Index; Global Fixed Income by Bloomberg Global Aggregate Total Return Index; US Fixed Income by Bloomberg US Aggregate Total Return Index; US High Yield by Bloomberg US Corporate High Yield Total Return Index. For illustrative purposes only. Past results do not guarantee future performance.
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