35 funds recorded in this asset class, with redemption terms and ongoing costs from the PRIIPs KID. Straight to the fund list ↓
By Niko Hatziiosifidis · last reviewed 23 Aug 2026
Private credit is the largest growth segment among semi-liquid funds: worldwide the asset class manages around US$2.1 trillion including committed capital (IMF, as at 2023), and in the European ELTIF market private debt is the largest asset class, with €11.4 billion and a 33.7% market share (Scope, end of 2025). The return comes almost entirely from ongoing loan interest, most of it floating-rate — not from capital gains. The decisive question is therefore not “How high is the distribution?” but “How good are the loans behind it?” — and that is precisely what a handful of figures in the fund report will tell you: PIK share, non-accrual rate, seniority and spread.
23 of the 35 private-credit funds recorded redeem quarterly; the median ongoing cost ratio is 2.19% p.a.
n = 35 · cost median from 23 funds that disclose costs · calculated from our fund database · as at Aug 2026
Private credit (also private debt) means: loans to companies, made outside banks and public markets — often faster and more tailored than a bank could manage, in return for higher interest. The investor earns not from rising prices but from interest — usually floating, so it rises and falls with the level of rates. Because interest flows continuously, private credit fits semi-liquid funds with regular distributions particularly well.
Senior loans to mid-sized companies, backed by collateral — served first if things go wrong. The lowest-risk rung and the backbone of most private credit funds.
Loans secured against specific assets (machinery, receivables, property). If the loan defaults, there is something tangible behind it.
A single loan that combines senior and subordinated portions at a blended rate. Convenient for the company, medium risk for the investor.
Sits further down the ladder: higher interest to compensate for the higher default risk.
Loans to young, growing start-ups, often alongside venture capital — young means: little substance to serve as collateral.
Loans to companies in difficulty or in special situations — high return potential, but the most speculative end of the scale.
No other private-markets building block has grown as fast in recent years. In spring 2024 the IMF put the global private credit market at around US$2.1 trillion — assets under management plus committed capital not yet called, as at 2023. In North America, private credit thus already finances some 7% of all corporate lending — an order of magnitude comparable to the market for syndicated loans or high-yield bonds (IMF GFSR, April 2024, ch. 2). Preqin expects growth to US$2.64 trillion by 2029; Moody’s reckoned on around US$3 trillion by 2028. Europe is the smaller market, but the one catching up faster: around €400 billion of assets under management against some US$1.1 trillion in the US — with Europe-focused funds already attracting 46% of all capital raised worldwide in the first three quarters of 2025, after 23% in 2024 (AllianzGI, as at March 2026).
For you as an investor, it is the second finding that counts: private credit is also the growth engine of the semi-liquid vehicles themselves. In the ELTIF market, private debt is the largest asset class with €11.4 billion across 56 funds (a 33.7% market share, against €7.7 billion the year before), and in 2025 the largest share of the fresh money went into this strategy too, at €3.9 billion — 37.6% of the €10.5 billion of new business (Scope ELTIF-Studie 2026). The reason lies in the mechanics: loans pay interest continuously and are repaid continuously — that generates natural cash flow, out of which a fund can service distributions and redemptions. You can see it in our database too: around a third of private credit funds redeem monthly or more often — more frequently than the market average. Private credit and the semi-liquid structure fit together technically better than any other combination. That explains the boom — but it does not yet answer the question of what you get for it.
The gross return of a private credit portfolio has three layers. First, the base rate: most direct loans are floating-rate — Euribor or SOFR plus a margin. If the policy rate rises, running income rises; if it falls, so does the fund’s capacity to distribute. Anyone extrapolating the returns of 2023–2024 is tacitly assuming that rates stay where they were. Second, the spread, the actual price of credit risk: in the European mid-market segment, margins have most recently stood at around 500–575 basis points over the reference rate, and at 425–475 basis points for larger companies (AllianzGI, as at March 2026). Third, fees from the lending business itself: origination fees and prepayment penalties that the fund collects.
Together, that historically produced considerable results: the Cliffwater Direct Lending Index (CDLI), the standard yardstick for US direct lending, has shown around 9.5% p.a. since its launch in September 2004 — before fund fees, unlevered, based on approx. 21,000 loans with a volume of US$549 billion (Cliffwater, as at 31 December 2025). From that you have to deduct: the fund’s management and performance fees, credit losses, and the return given up through the liquidity buffer that every semi-liquid fund has to hold for redemptions. And the illiquidity premium shrinks when a lot of capital pushes into the market: the yield advantage of direct lending over syndicated loans was most recently around 260 basis points, after 400–500 basis points on average over the past decade (iCapital, as at 2025). High past distributions are therefore not a promise — they were the product of a particular interest rate and spread environment.
A private credit fund publishes more hard information about the quality of its portfolio than many investors make use of. Four places are worth a look. PIK share: if interest is not paid in cash but added to the loan (“payment in kind”), income flows only on paper. A certain proportion is normal depending on the strategy — if it rises markedly, lenders are often relieving their borrowers precisely of debt service, because cash flow is tight. For context: at the 15 largest listed US BDCs, PIK interest most recently accounted for 8.3% of total interest income (LCD/PitchBook, Q2 2025); the US Federal Reserve cited the increased use of PIK as an indication that some borrowers are under pressure (Fed Financial Stability Report, May 2026). Non-accrual rate: loans on which the manager no longer firmly expects payment in full are put on “non-accrual”. Across 213 US BDCs, that rate most recently stood at 1.9% of loans at cost — and rising; on a broader definition, 3.3% (LCD/PitchBook, Q1 2026). Seniority and collateral: what proportion of the portfolio is first-ranking secured (“first lien / senior secured”), and how high is the loan-to-value? A fund with a 90% senior share and a fund with a high mezzanine or PIK share can quote the same target return — and carry completely different risks. Valuation: direct loans have no market price; they are valued by model and, as long as they are being serviced, stand close to par (see Valuation & NAV). Problems therefore show up in the NAV late, but then unmistakably: non-accrual positions were most recently written down to an average of around 56% of cost (LCD/PitchBook, Q1 2026). In private credit a smooth NAV curve says little about risk — the non-accrual and PIK lines in the report say more.
Since 2024, supervisors around the world have been debating whether the boom is building up risks for the financial system. The findings are more nuanced than the headlines. The IMF judged that stability risks appeared limited for now — but warned that they could turn systemic if the asset class remained opaque and continued to grow exponentially; as vulnerabilities it named relatively small, highly indebted borrowers, valuation uncertainty, stacked leverage and the redemption risk of growing semi-liquid vehicles (IMF GFSR, April 2024). The Financial Stability Board (FSB) put the bank credit lines to private credit funds captured in its data at around US$220 billion and stressed that the sector is “untested in a prolonged downturn”; redemption options in evergreen funds could amplify stress procyclically (FSB, May 2026). The US Federal Reserve, by contrast, classified the risks as “limited and manageable” (Fed Financial Stability Report, May 2026). There have been concrete stress tests: the failures of the car parts maker First Brands and the car lender Tricolor (autumn 2025) set off the debate about “cockroaches” in the credit market (Jamie Dimon, Oct 2025) — market participants countered that these were cases of fraud, not a symptom of bad lending across the board. The honest summary: default rates are rising from a low level — KBRA measured around 2.3% on an issuer basis in mid-2026 (1.4% loan-weighted in 2025) — non-accruals are slowly increasing, and whether the structures will come through a genuine recession as well as they came through the rise in rates is something nobody has yet observed. If you invest, you should know both.
Floating rate means: credit risk instead of interest-rate risk. Income is usually a reference rate plus a spread — so the running yield breathes with the level of rates, while the price risk of conventional bonds largely disappears. In return, credit quality moves to the centre: the manager’s default and recovery assumptions are the key variable.
The PIK share is a useful figure. Where interest is capitalised instead of paid out (payment in kind), that is normal in some strategies — but the share shown in the reporting is a good indication of how much of the income already arrives as cash. One of the most revealing numbers in the quarterly report.
Origination and documentation are what separate managers. Originating loans yourself, with direct access to the borrower and individually negotiated protective clauses (covenants), is a different business from buying up broadly syndicated loans — this is where a manager’s strength shows. Fund-level leverage works on the result in both directions.
The metrics in detail. Portfolio yield-to-maturity (or “weighted average yield”) is the most informative return measure — it contains the base rate, the spread and the amortisation of fees, but not yet any defaults and no fund costs. Weighted spread isolates the risk premium from the level of rates: two funds with a 10% yield can, at the same base rate, be running 450 or 650 basis points of spread — the second is taking measurably more risk. Always read the non-accrual rate twice over: at cost (shows how much loan volume is going bad) and at fair value (shows how much of the write-down has already been absorbed); the difference tells you how conservatively the marks are set. The PIK share of total income separates paper income from cash income — and between “PIK by design” (agreed from the outset, e.g. in mezzanine) and “PIK by amendment” (granted after the event, a stress indicator) lies a difference in quality that good reports disclose. Seniority/LTV: the first-lien share, loan-to-value and the borrowers’ net debt/EBITDA place the fund on the risk ladder; and then the covenant question — around 90% of private term loans still contain financial maintenance covenants, while the broadly syndicated market is largely “cov-lite” (S&P Global, 2025).
Typical misreadings. First: a high distribution ≠ high quality. The distribution can be pushed up almost at will through leverage, PIK income and subordinated loans — it is a target of the product design, not a mark of quality. Second: NAV stability ≠ low risk. A performing loan stands close to par by construction of the model; the write-down comes late and abruptly. Third: historic direct lending returns (CDLI: ~9.5% p.a. since 2004, before fund costs) are an index of unlevered gross assets — not the net expected value of a semi-liquid retail fund with a liquidity buffer and fees. Fourth: recovery assumptions are disputed: industry estimates for direct lending lie at 65–75%, but robust through-the-cycle data are missing.
Questions for the manager: How high are the YTM, the weighted spread and the PIK share, and how have they moved over four quarters? How does the fund define non-accrual, and how are those positions marked? What proportion is self-originated versus bought in? How much fund leverage, how large a liquidity buffer, and what happened in the heaviest redemption quarter? The standard work: Stephen L. Nesbitt, Private Debt — Yield, Safety and the Emergence of Alternative Lending (2nd ed., Wiley 2023).
A fund that lends directly to companies or buys up loans — outside the banks and the stock exchange. The return comes from ongoing interest (usually floating: reference rate plus a risk margin), not from capital gains. Semi-liquid versions (ELTIF, evergreen) redeem units at set intervals and subject to limits.
Direct lending is the lowest-risk tier within private credit — mostly first-ranking secured loans with historically low default rates, though these have been rising lately (KBRA, mid-2026: ~2.3% on an issuer basis). “Safe” in the sense of a bank deposit it is not: credit losses, valuation risks and redemption restrictions remain; the market has not yet been through a pronounced recession at its present size (FSB, May 2026).
Historically, the Cliffwater Direct Lending Index has shown around 9.5% p.a. since 2004 — before fund fees, unlevered, on US data (as at end of 2025). Less reaches the investor net: costs, the liquidity buffer and the prevailing level of interest rates determine the outcome. Past values are no forecast.
Because most loans are floating-rate, running income falls with the reference rate — the distributions of the high-rate years 2023–2024 cannot simply be extrapolated. What remains is the spread, that is, the risk margin over the base rate.
“Payment in kind”: interest is not paid in cash but added to the loan amount. Normal depending on the strategy — but a high or growing PIK share can indicate that borrowers have payment problems and that income is arising only on paper. The PIK share is stated in the fund report.
Disputed — and not something that can honestly be settled either way. The IMF and the FSB currently regard the risks as limited, but warn of opacity, stacked leverage and the rapid growth of semi-liquid vehicles; the US Federal Reserve calls the risks “limited and manageable” (as at May 2026). Individual cases such as First Brands and Tricolor (2025) showed that problems become visible late.
Last reviewed: 23 Aug 2026 · Methodology · Not investment advice.
Redemption terms and ongoing costs from the PRIIPs KID · click a fund name to open its detail view. Filter and sort interactively →