A stability play in fixed income

As public credit markets remain choppy, Nayef Perry, Global Head of Direct Credit at Hamilton Lane, argues that advisors should consider private credit as a source of portfolio ballast, according to a Wealth Professional feature focused on private assets and alternatives. Perry acknowledges that private credit appears calmer than listed equivalents largely because of market mechanics: public bonds reprice intraday, while private credit assets are valued monthly or quarterly depending on vehicle structure. He contends that this pricing cadence creates stability, while the underlying macro drivers of public fixed income volatility, including fiscal deficits, AI debt issuance and elevated inflation, have had less direct impact on private credit, which he describes as operating on a different part of the economy.

Perry attributes further structural stability to the mid-market segment where Hamilton Lane focuses. He says equity contributions as a percentage of total capitalization in middle-market private credit are near historic highs, indicating stronger borrower balance sheets. Hamilton Lane's deals include at least one financial maintenance covenant, and floating-rate structures can benefit when rates reverse, while offering duration benefits relative to long-dated government debt.

Perry acknowledges recent headline pressure on funds lending to software-as-a-service companies amid AI disruption concerns, but characterizes that pressure as driven by investor confidence rather than fundamentals, noting that the broader default rate has remained low and borrowers have benefited from continued US GDP expansion. He also argues private credit provides insulation from the growing volume of AI-related debt in public markets, since most hyperscaler AI debt is investment grade and private credit sits predominantly below that threshold.

On retail access, the article notes private credit has historically been institutional, with infrequent pricing implying low liquidity that suits longer horizons less well. Perry says evergreen and semi-liquid structures are replacing the closed-end fund model and minimum investments are falling. He points to the shift from bank to non-bank lending as a driver, with non-bank lenders building more retail-oriented vehicles. Perry concludes that wealth investors are increasingly viewing private credit as a permanent portfolio component.