Private credit is not the new fixed income.

Few asset classes have grown as quickly, or been marketed as confidently, as private credit. Floating-rate loans to middle-market companies have delivered attractive income through a period when traditional bonds struggled, and the pitch that follows is simple: replace part of your fixed income allocation with something that yields more and marks more smoothly.

We understand the appeal, and we allocate to the asset class for many of our clients. But we think the framing is wrong, and in our experience the framing is what determines whether an allocation helps or hurts when conditions change.

What fixed income is actually for

In a multi-generational portfolio, high-quality bonds do two jobs. They fund known liabilities — distributions, capital calls, tax payments, philanthropy — without forcing sales of risk assets at the wrong time. And they tend to hold or gain value when equities fall sharply, which is precisely when a family needs flexibility most.

Private credit does neither reliably. Its liquidity is contractual and limited; redemption gates in evergreen vehicles tend to activate in exactly the environments where liquidity is most valuable. And because its borrowers are leveraged operating companies, its credit losses are correlated with the equity cycle, even when reported marks are not.

Where we think it belongs

We treat private credit as part of a client's growth allocation — closer in character to a lower-volatility equity exposure than to bonds. That changes how it is sized and what it displaces.

• Sizing is driven by the family's liquidity map, not by yield targets. We stress-test five years of distributions and commitments before setting a ceiling.
• Allocations are funded primarily from public equity and hedge fund budgets, not from core fixed income.
• Vintage diversification matters. We commit across multiple years rather than deploying in a single cycle.
• Manager selection weights restructuring and workout capability as heavily as origination.

What we are watching

Underwriting standards have loosened as capital has poured in: covenant protections are thinner, payment-in-kind features are more common and leverage multiples have crept higher. None of this signals an imminent problem, but it does mean dispersion between managers is likely to widen. In our view, the next several years will reward selectivity far more than exposure.

Private credit can be a valuable component of a long-horizon portfolio. Used as a substitute for the ballast that bonds provide, it can leave a family short of liquidity at exactly the moment it matters. The distinction is not academic — it is the difference between an allocation that compounds and one that constrains.