The Rise of Private Credit: How It’s Changing the Financial Landscape
In a world where the financial landscape constantly evolves, investors always seek fresh opportunities that offer significant rewards while posing manageable risks. Private credit, formerly a niche market, is now popular for institutions and individual investors. But what is private credit, and why is it gaining traction?
What is Private Credit?
Private credit refers to loans and debt financing made available by non-bank lenders such as investment funds and private institutions. Unlike typical bank loans, private credit agreements are direct, tailored lending agreements that provide greater flexibility to borrowers and higher potential yields for investors. At Kilde, our carefully curated portfolio spans consumer and business lending across multiple geographies, ensuring a balanced and diversified loan book.
Why is Private Credit Gaining Momentum?
There are several key reasons why investors are turning to private credit:
✅ Higher Yields: With interest rates fluctuating, private credit provides an attractive alternative to bonds and savings accounts. At Kilde, we offer historical returns of 12-13% p.a.
✅ Less Dependence on Banks: Post-2008 financial regulations have made traditional banks more conservative in lending. Private credit lenders quickly fill this gap, funding businesses while creating new investment opportunities.
✅ Proven Risk Management: At Kilde, we have maintained a 0.00% default rate thanks to our structured approach. We ensure that it will not be exposed to more than 20% of a borrower's loan book, and we actively manage risks by growing with our borrowers, utilising put options, and replacing loans past due (DPD).
✅ Institutional Interest is Growing: More institutions are allocating capital to private credit to look for stable, high-yield opportunities. Kilde currently manages $90 million in assets under management (AuM), with individual investors signing up daily, signalling the strong momentum in this space.
Who is Investing in Private Credit?
Once reserved for large institutions, private credit is now attracting family offices, high-net-worth individuals, and accredited investors. With the rise of fintech platforms, access to private credit is more efficient, transparent, and data-driven than ever before.
What are the Risks?
Like any investment, private credit comes with risks:
🔹 Liquidity Constraints: Investments are often locked in for extended periods, meaning they are not as easily tradable as stocks or bonds.
🔹 Credit Risk: Borrowers may not qualify for standard bank loans, making due diligence and risk management vital.
🔹 Market Transparency: Private credit arrangements, unlike stocks, are not publicly traded. Therefore, investors rely on professional fund managers' expertise.
Is Private Credit Right for You?
Private credit is no longer merely an alternative investment but a key component of many investors' portfolios. With the ability to create steady cash flow, diversify, and hedge against inflation, it's simple to see why it's one of the most attractive investing trends today.
Learn more here with Johanna Kruger as she discusses private credit topics with Mahmoud Khodor and shares her thoughts on them.
Disclaimer Notice
This page is provided for general informational purposes only and does not constitute legal, financial, or investment advice. Please refer to our Full Disclaimer for important details regarding eligibility, risks, and the limited scope of our services.
