Private Credit

Private credit (sometimes called private debt) fills lending space that banks have increasingly stepped back from, particularly for mid-sized companies that are too small for public bond markets and underserved by traditional bank lending. Strategies range from direct lending — straightforward senior secured loans to operating companies — to mezzanine financing (debt that sits between senior debt and equity in a company's capital structure, typically carrying higher interest to reflect greater risk) and specialty finance (lending against specific assets like royalties, invoices, or aircraft).

For families, private credit can be attractive as a source of income-oriented returns that are less correlated with public equity markets than many other asset classes. Because loans are typically floating-rate — meaning the interest paid adjusts with broader market rates — they have historically behaved differently from fixed-rate bonds during periods of rising rates. That said, credit risk (the risk that a borrower cannot repay) is real, and losses in a downturn can be meaningful, particularly in more junior or subordinated loan structures.

A family office building out an alternatives program might access private credit through a fund managed by a specialist lender, through co-investments in individual loans alongside that manager, or — for families with very substantial balance sheets and dedicated credit expertise — through direct origination, where the family itself acts as the lender. Each path carries different operational demands and risk profiles. Tax treatment of credit income varies by structure and jurisdiction, so families must work closely with qualified CPAs and attorneys before allocating capital here.