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Market Overview
Private credit is an $8 trillion market in the United States, comprised of numerous sub-markets that ultimately cater to the vast borrowing needs of consumers and small to medium sized businesses. Contrary to the highly standardized $40 trillion+ U.S. public credit market serving the needs of governments, financial institutions and large corporations, the U.S. private credit market has been historically unorganized and deeply fragmented.

What exactly makes private credit, private? Two distinct, mutually exclusive features:
  1. 1.
    Debt security not listed on any exchange or freely-tradable in the public market
  2. 2.
    Credit products originated by a lender, whether bank or non-bank
Examples of sub-markets that coincide with feature 1 above include the structured credit market in the form of private debt securities, such as private asset-backed securities, as well as the U.S. private placement market, which are privately placed secured and unsecured bonds for investment grade companies in the U.S.
Examples of sub-markets that coincide with feature 2 above include the structured credit market in the form of anything not issued as a security, alternative/fintech lending, venture debt, mid-market loans and commercial loans.

A certain hierarchy of private lending ultimately forms the basis of the U.S. private credit market.

At the top of this pyramid, are those ultimately lending to the larger non-bank lenders, which are typically banks, pension funds and other large institutional credit investors that seek exposure to private credit but are willing to accept much lower returns in exchange for much lower risk through extensive diversification.
The top of the pyramid is supported by all the individual private credit deals that are being sourced, structured and serviced at each rank below. The lower the private credit deal between lender and borrower takes place, the more concentrated the risk and therefore, the higher the return.
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"Private Credit" Defined
Private Lending Pyramid