The reasons for this growing popularity are multifold but can be most simply explained with the key advantage of private credit-generated returns scaling alongside interest rates — a quality that more mainstream returns such as bank deposits are unable to match, according to a private sector class report by Altheia Capital released April 10.
In today’s market marked by persistent inflation and rising interest rates, it is increasingly tough for investors to generate satisfactory yields on their long-term investments.
In the past year and a half, the US Federal Reserve Board lifted interest rates 11 times to combat inflation, taking the federal funds rate to a target range of 5.25%–5.5%, its highest since early 2001.
In such an environment, floating rate funding, particularly those in the realm of private credit, has grown to be highly appealing. A 2022 survey by the UBS Global Family Office states that in 2017, a mere 8% of investors took on private debt. Last year, the number grew to 27%.
