Private Credit Investing: What You Need to Know

WHAT IS PRIVATE CREDIT?

Private Credit Investing Basics

Credit is a contract (often, a loan) that a borrower repays a lender with interest. Private credit refers to privately negotiated loans between a borrower and a non-bank lender.

A History of Private Credit

Private Credit is a fast-growing asset class and there are several forces behind its rise.

Bank Retrenchment
Rise in Private Credit

The retrenchment of US and European banks creates opportunities for private lenders as borrowers seek partners who can provide flexibility, speed of execution, and surety of capital.

Decline in the Number of Commercial Bank Lenders

When capital from financial institutions became harder to obtain, private lenders stepped in to fill the void.

Growth in Global Private Credit Assets under Management

Comparing Private Credit to Traditional Fixed Income

Private credit may offer the potential for higher yield and increased investor protections through negotiated terms, covenants and pricing.

	Traditional Fixed Income	Private Credit
MARKET DESCRIPTION	Publicly Syndicated and Sold	Privately Originated and Held
TRADED	Yes	No
COUPON PAYMENTS	Yes	Yes
COUPON STRUCTURE	Typically Fixed Rate	Typically Floating Rate
CREDIT RATING	Rated	Not Rated
CALL PROTECTION	Varies	Yes
LIQUIDITY	Liquid	Illiquid
VALUATIONS	Frequent	Infrequent

For illustrative purposes only.

ATTRIBUTES OF PRIVATE CREDIT INVESTMENTS

Private Credit Investments Typically Seek to Deliver...

Income
Total Return
Lower Volatility

Private credit has offered higher yields than many traditional fixed income assets.

Yield to Maturity

The asset class has historically delivered a strong absolute return profile across various market environments.

Historical Annualized Returns (2005-2024)

Historical Annualized Returns (2005-2022) — Data as of 12/31/24. Source: Cliffwater US Direct Lending Index, an asset-weighted index of directly originated middle-market loans.

The return pattern of private credit has historically been smoother than equities.

Historical Returns vs. Equities (2005-2024)

Historical Returns vs. Equities (2005-2022) — Data shown annualized (1/1/2005-12/31/2024). Equities represented by Cliffwater US Direct Lending Index, an asset-weighted index of directly originated middle-market loans (Source: Cliffwater). US Equities represented by the S&P 500 Index which covers performance for large-cap US equities (Source: Bloomberg).

CONSIDERATIONS FOR PRIVATE CREDIT INVESTING

Here are some common types of private credit investment strategies:

Senior Direct Lending

Junior Debt

Mezzanine Debt

Distressed Debt

Specialty Finance

Illustrative Risk/Return Profiles by Fund Type

While each has a unique risk and return profile, there are some broad risk/return generalizations for each of the private credit asset classes based on historical data.

There are several factors that drive the risk/return profile of private credit investments:

Creditworthiness of the Borrower
Seniority
Interest Earned

It’s important to consider both a borrower’s current financial health and their prospects for repayment in the future.

Capital stack seniority determines the order in which investors are repaid if a business/ borrower runs into trouble. Senior debt must typically be repaid first and has the lowest risk and return potential. Equity owners sit below all debtholders and typically receive higher returns for taking on a higher amount of risk.

Illustrative Capital Stack

The Capital Stack: How seniority affects risk and return

Private credit loans are typically floating (or variable) rate versus fixed rate. When loans are floating rate, the interest owed by the borrower will float higher (or lower) as short-term rates rise (or fall). As interest rates rise, so does the interest payment due to the lender. Of course, the inverse is true when interest rates decline.

Fixed vs. Floating Rate Interest Rate Risk

Difference between Fixed-Rate Debt and Floating Rate Debt — * The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.

Private Equity

Private equity involves investment in private companies with growth potential or private businesses that need financial restructuring with the intention of enhancing the value of the invested companies over time.
Explore Private Equity
Private Infrastructure

Private Infrastructure entails the raising of private capital to fund the development of infrastructure, including the physical structures, facilities and systems, required for economies and societies to function.
Explore Private Infrastructure
Private Real Estate

Private real estate refers to investment in real estate properties that are privately owned and managed by individuals, partnerships, or private companies, rather than being publicly traded in the stock market.
Explore Private Real Estate

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Q1 2026 Global Wealth Investment Playbook

Unlocking Private Credit

Private Credit Investing Basics

A History of Private Credit

Private Credit is a fast-growing asset class and there are several forces behind its rise.

The retrenchment of US and European banks creates opportunities for private lenders as borrowers seek partners who can provide flexibility, speed of execution, and surety of capital.

When capital from financial institutions became harder to obtain, private lenders stepped in to fill the void.

Comparing Private Credit to Traditional Fixed Income

Private credit may offer the potential for higher yield and increased investor protections through negotiated terms, covenants and pricing.

Traditional Fixed Income

Private Credit

Private Credit Investments Typically Seek to Deliver...

Private credit has offered higher yields than many traditional fixed income assets.

The asset class has historically delivered a strong absolute return profile across various market environments.

The return pattern of private credit has historically been smoother than equities.

Here are some common types of private credit investment strategies:

Illustrative Risk/Return Profiles by Fund Type

While each has a unique risk and return profile, there are some broad risk/return generalizations for each of the private credit asset classes based on historical data.

There are several factors that drive the risk/return profile of private credit investments:

It’s important to consider both a borrower’s current financial health and their prospects for repayment in the future.

Connect with KKR

If you would like to learn more about KKR, we invite you to provide your details.   

Wealth individual investors: Please contact your financial advisor/banker for further information.

Q1 2026 Global Wealth Investment Playbook

Unlocking Private Credit

Private Credit Investing Basics

A History of Private Credit

Private Credit is a fast-growing asset class and there are several forces behind its rise.

The retrenchment of US and European banks creates opportunities for private lenders as borrowers seek partners who can provide flexibility, speed of execution, and surety of capital.

When capital from financial institutions became harder to obtain, private lenders stepped in to fill the void.

Comparing Private Credit to Traditional Fixed Income

Private credit may offer the potential for higher yield and increased investor protections through negotiated terms, covenants and pricing.

Traditional Fixed Income

Private Credit

Private Credit Investments Typically Seek to Deliver...

Private credit has offered higher yields than many traditional fixed income assets.

The asset class has historically delivered a strong absolute return profile across various market environments.

The return pattern of private credit has historically been smoother than equities.

Here are some common types of private credit investment strategies:

Illustrative Risk/Return Profiles by Fund Type

While each has a unique risk and return profile, there are some broad risk/return generalizations for each of the private credit asset classes based on historical data.

There are several factors that drive the risk/return profile of private credit investments:

It’s important to consider both a borrower’s current financial health and their prospects for repayment in the future.

Connect with KKR

If you would like to learn more about KKR, we invite you to provide your details. Wealth individual investors: Please contact your financial advisor/banker for further information.

If you would like to learn more about KKR, we invite you to provide your details.   

Wealth individual investors: Please contact your financial advisor/banker for further information.