The Rise of a New Asset Class
Since the Great Financial Crisis, the low yield environment, as well as certain regulatory changes, have given rise to a previously lesser-known alternative asset class known as “private credit”. Private credit funds target ownership in debt and debt-like instruments across various segments (corporate, consumer, real estate, litigation, life settlements, royalties, etc.) with the goal of generating high yields, mostly in the form of ordinary income, for their investors.
Catching the Service Provider World Off Guard
As this asset class rose to popularity rather quickly, it seems to have caught the outside service provider world largely unprepared, having a lack of experience on how to manage, account, and administer this new asset class. As a result, most service providers advising private credit managers defaulted to their knowledge of private equity fund formation and administration, resulting in many of these funds being structured like traditional private equity funds.