Direct lending may be a compelling alternative to public equities, especially in light of projected asset class returns, offering similar and possibly better performance with lower volatility.
The private credit asset class has several obvious similarities to small cap public equities, but differs in the constituents of its return and risk profile: contractual cash flows and seniority in the capital structure.
For investors (in many cases retirees) seeking to reduce overall portfolio risk and increase their income, direct lending may be an attractive equity replacement, especially as forward equity return expectations decline.
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