Private credit funds explained

Private credit funds lend money to companies, real estate owners and other borrowers outside the public bond market and bank loans. The market has grown quickly since 2008 as banks pulled back from lending to mid-sized companies. 1,051 credit and lending funds filed a Form D in the last two years, by AltMountain's count of fund names.

The main strategies

• Direct lending. Senior secured loans to mid-sized private companies, often owned by private equity firms. Usually floating rate.
• Mezzanine and junior debt. Loans ranked below senior debt, paid a higher rate, sometimes with equity warrants.
• Distressed and special situations. Buying debt of troubled companies at a discount, aiming to profit from a recovery or restructuring.
• Real estate debt. Bridge, construction and mezzanine loans secured by property.
• Asset-based and specialty finance. Loans backed by receivables, equipment, royalties, litigation claims and other assets.

How investors are paid

Returns come mostly from interest, plus fees charged to borrowers and any discount to face value at purchase. Because most loans are floating rate, income rises and falls with short-term interest rates. Many funds distribute income quarterly.

Who can invest and how much

Private credit funds sold under Regulation D are usually limited to accredited investors or qualified purchasers. The median minimum stated by U.S. credit funds on file is $250K; 40% of those that state a minimum require $1 million or more. 11% use Rule 506(c). Investors who don't qualify can use registered products such as business development companies (BDCs), interval funds and credit ETFs.

Figures are from Form D notices filed with the SEC in the two years to Nov 6, 2026. "Raised" is cumulative sales reported on Form D, not the size or performance of an offering. Funds and programs are grouped by name and by the industry the filer chose, so a few may be misclassified.

Risks

• Credit losses when borrowers default, especially in a recession.
• Valuation. Loans are marked by the manager or a valuation agent, not by a market, so reported values can lag reality.
• Leverage at the fund level can magnify losses.
• Liquidity. Closed-end funds lock up money for years; evergreen funds limit and can suspend redemptions.
• Fees similar to private equity: a management fee plus a performance fee over a hurdle.

See how to invest in private equity and IRR, TVPI and DPI.

Browse other private funds by state, including credit, lending and multi-strategy funds, or see new funds and the largest.

Education, not advice. This guide explains general rules and market practice. It is not legal, tax or investment advice, not an offer or solicitation, and not a recommendation of any fund. Rules change; confirm details with the SEC and a qualified professional. Disclosures