Private credit is an asset class that involves lending money to middle-sized companies at relatively high rates of interest and has become increasingly popular with public pension funds seeking higher investment returns and trying to reduce unfunded liabilities.
Although this new asset class is understandably attractive to investment managers stretching to achieve high assumed rates of return, public pension systems should also consider the risk of credit defaults, high fees levied by intermediaries, and lack of liquidity before jumping in too deep.
The definition of a middle-sized, or in industry parlance, a “middle market” borrower varies. Investopedia defines the middle market in
