Private Credit: Why and Why Now?

As a part of a diversified portfolio, we believe that investing in private credit can provide three distinct benefits to investors: predictable income, increased stability, and risk-adjusted returns.

Let’s dive in!

Predictable income: Investors have historically relied on Private Credit to pay regular income distributions, typically quarterly, much like a dividend. The income is paid from the contractual interest earned on the private debt assets within the Fund.

Increased stability: Private Credit products don’t trade on public exchanges, reducing their correlation to public markets as well as the overall volatility. Diversifying an equity-heavy portfolio with Private Credit should lead to less portfolio volatility.

Risk-adjusted returns: Private Credit targets higher returns than a traditional bond portfolio. Beneath the Private Credit “umbrella,” there are debt instruments that seek higher returns by lending money to a company in some financial distress at a high rate. 

And Why Now?

We believe Private Credit is uniquely positioned to benefit from this rising rate environment for three main reasons. 

Floating rate credit: With inflation at 40 year highs, Central Banks around the world are rising rates in an effort to combat inflation. The vast majority of credit assets that Carlyle invests in are floating rate assets; this means that as interest rates increase, Carlyle captures that increased amount they are being paid by their borrowers. 

Higher yields: The yields that are being paid are the highest they have been since the Covid crisis, and since then, the Great Financial Crisis. Simply put, Carlyle is being paid more to take risk today than they have been in a very long time. To the extent that interest rates remain elevated/rise further, CTAC will be a benefactor of this trend.

Low default rates: Despite these changing market dynamics, default rates are still at historic lows. Additionally, interest coverage ratios, the measure to which a company can pay interest on the outstanding debt, remain strong compared to historical averages. This is to say that the risk associated with the investments remains steady while still being able to benefit from the increase in interest rate payments.

Carlyle Tactical Private Credit Fund (“Fund”) is a Registered Investment Company product offered by Carlyle Global Credit Investment Management and made available on Titan’s platform as one of many potential investment options available to Titan clients, that may or may not be recommended based on an individual client’s investment objectives and risk tolerance. Please review the following summary of risk factors, as well as the prospectus, for a full list of risks associated with investing in the Fund before making any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not ensure a profit or protect against loss. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Titan is not registered. Please visit www.carlyle.com/fund for important additional disclosures.