Private Credit (2024)

FAQs

Why private credit answer? ›

Advantages of Private Credit

Private credit is an excellent hedge against inflation and rising interest rates. It is effective because companies generally receive it on a floating interest rate basis.

Private credit solutions from S&P Global Market Intelligence combine differentiated data, consistent methodologies, and end-to-end workflows to help managers identify opportunity, mitigate risk, and achieve optimal returns—confidently, transparently, and at scale.

Although about 90% of the technical questions will be the same as an M&A interview, it is super important to prepare for qualitative credit questions. For example, “why private credit and not private equity?”, or questions about deal dynamics and why a company is a strong LBO candidate.

What are the common covenants and terms in private credit agreements? How do you assess collateral quality in secured lending? What are the diversification strategies in a private credit portfolio? How do you manage and monitor credit risk?

Private credit and private equity are both alternative assets that could be attractive to investors looking for different benefits for their portfolios. Private credit may be appropriate for investors seeking relatively stable and predictable returns that often exceed those of bonds and other fixed-income assets.

The numbers show that, on average and in terms of salaries and bonuses alone, private credit professionals out-earn people in private equity at all levels. That, however, is only part of the story. If you work in either private credit or private equity, the big money is made in carried interest.

Private credit is a way for businesses to raise capital (money). In private equity, an investor owns all or part of the company. In private credit, the investor lends money to the company in exchange for interest payments and can impose covenants and/or collateralization that secures the loan.

Private credit funds say they can accommodate borrowers whose credit metrics make them ineligible for a bank loan (as is the case for many fast-growing but loss-making companies) or that require very flexible terms. Another advantage is that the pricing of private deals is often set up front.

The lack of rise in private sector indebtedness over the past decade contrasts starkly with past episodes and defies the notion that private credit is fueling a bubble.

Highly developed quantitative skills (financial analysis, modeling, valuation and reporting) • Exceptional attention to detail with ability to produce a high quality work product • Project management and presentation skills combined multi-tasking abilities • Highly developed verbal/written communication skills ( ...

How do you prepare for a credit control interview? ›

Tips for credit control interviews

Credit control candidates need to display friendliness and an ability to establish rapport in their work, but they should also have the ability to be business-like and professional when they have to be. Be sure to answer questions as clearly and succinctly as possible.

Some of the most popular private credit firms employ 1 – 2X leverage in terms of debt to equity. This introduces a level of risk that needs to be addressed.

Investors interested in gaining exposure to this fast growing asset class may invest through an experienced fund manager, a platform that specializes in private credit or directly into a single company opportunity. Finding the right partner is critical to ensure optimal returns and a prudent risk approach.

Private credit markets continue to increase in size and importance. PitchBook estimates they currently stand at around $1.6 trillion (including around $500 billion of dry powder). The US market accounts for the lion's share (around $1.1 trillion), with Europe accounting for most of the remainder (Figure 1).

Professionals in the private credit arena will have the opportunity to ride this market growth regardless of whether or not defaults rise. The industry is largely counter cyclical and when the market is more volatile, direct lenders can be more nimble and more creative than the institutional lending sector.

Getting involved in private credit is also a way for investors to diversify their holdings and protect against price swings in public markets. It also gives them exposure to more companies than those available in the public markets.

Because private credit tends to lend to niche sectors or specific industries that are less sensitive to interest rate movements, and the loans originated by these funds often have shorter durations or variable interest rates, it can also provide investors with a degree of insulation from interest rate risk.

“In 2022, private credit investments offered high income, low defaults and less volatility. That compared favourably to public markets, which also offered high income and low defaults but came with higher volatility,” Sheldon noted in KKR's latest market review.