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Private Credit: The New Alternative Asset Class for High-Net-Worth Investors

Private Credit: The New Alternative Asset Class for High-Net-Worth Investors cover

Affluent investors increasingly look to private credit for access to institutional-level opportunities that enhance wealth strategies. Beyond attractive yields, it supports income approaches aligned with complex liquidity needs and multi-generational priorities. Its greatest strength comes from complementing traditional assets while reinforcing stability across shifting economic and market environments.

Why Private Credit Is Gaining Ground

Institutional demand for private credit continues to expand, with US private credit markets growing from about $46 billion in 2000 to nearly $1 trillion by 2023, according to the Boston Federal Reserve. This trajectory highlights the rising appetite for strategies that generate steady, risk-adjusted income in changing conditions. For high-net-worth investors, the expansion signals growing confidence in an asset class once considered highly specialized.

private credit

For high-net-worth individuals, this trajectory represents more than market growth; it signals democratization of sophisticated lending strategies once exclusive to pensions, endowments, and sovereign wealth funds. Direct lending, mezzanine financing, and distressed debt each offer distinct risk-return profiles, but all require disciplined evaluation and careful manager selection.

Superior Yields with Reduced Market Correlation

Private credit's appeal extends beyond yield enhancement. Unlike traditional fixed-income instruments, private lending structures often show lower correlation with public market volatility, creating income streams that persist through economic stress and market disruption.

This independence proves especially valuable for retirees seeking stable distributions, entrepreneurs managing liquidity events, or families funding philanthropic initiatives. Business owners find predictable returns particularly useful during succession planning or capital expansion phases, where cash flow certainty supports strategic decision-making.

The underlying mechanics reinforce this stability: lending structures typically secure terms against tangible, high-quality assets, providing downside protection while enabling participation in economic recoveries.

​Strategic Integration Maximizes Portfolio Benefits

Private credit achieves its greatest impact when thoughtfully integrated into comprehensive wealth planning. Rather than functioning as a standalone investment, it works best as part of a coordinated strategy that addresses current income needs while advancing long-term legacy objectives.

Planning considerations must encompass tax treatment, estate implications, and correlations with existing holdings. Within this framework, private credit serves dual purposes: providing portfolio stabilization during volatile periods while contributing to wealth accumulation across generations.

Manager Selection: The Critical Success Factor

Attractive yields mean little without proper execution. Manager quality often determines whether private credit delivers consistent results or encounters avoidable setbacks. Key evaluation criteria include:

  • Underwriting standards and borrower quality assessment
  • Track record through complete credit cycles, particularly downturns
  • Fee transparency and alignment of manager capital with investor interests
  • Operational infrastructure and risk management capabilities

A manager's ability to preserve capital during challenging periods often proves more revealing than performance in favorable conditions. This discipline separates sustainable performers from those benefiting primarily from accommodating market environments.

Integrating Private Credit into Wealth Planning

The rise of private credit reflects evolving investor demands for strategies that balance wealth preservation with growth objectives. As institutional-quality access becomes increasingly available to individual investors, private credit appears positioned for a lasting role in diversified portfolio construction.

The asset class addresses fundamental investor needs: consistent income generation, reduced correlation with traditional markets, and participation in lending opportunities historically reserved for large institutions. These characteristics suggest private credit will continue expanding beyond its current trillion-dollar footprint.

If you're considering whether private credit belongs in your investment mix, I'd be glad to walk you through the potential benefits and trade-offs. Together, we can explore how it might strengthen your overall financial strategy.

​​ABOUT JEFF

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic wealth management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Scottsdale, Arizona, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email jgilbert@balboawealth.com.

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.