Private credit investments are pools of non-publicly traded loans to corporations, in which investors invest and participate in the earnings of a private credit portfolio. These investments are sold through investment advisors who like offering investments that their clients cannot source on their own. In recent months, a fear has gripped investors about the possibility of massive defaults on loans in private credit portfolios.
Publicly traded business development companies (BDCs) also make loans to corporations. BDC client companies are smaller than the typical private credit borrower, and they become deeply involved in the business operations of the companies they finance. The businesses and profits of quality BDCs will be fine. However, fears about private lending have also driven BDC share prices down.
This post originally appeared at Investors Alley.