Optimize Your Private Credit Exposure: A Framework for Diversifying Beyond Corporate Direct Lending

May 14, 2024

Private credit is often perceived as synonymous with its largest segment: corporate direct lending. Yet several dozen other private credit segments exist, each with distinct risk-return characteristics.



Since the essence of diversification is to spread bets intentionally across investments with markedly different risk and return characteristics, we introduce a two-by-two framework for classifying private credit segments based on loan size and underwriting type, which are key dimensions of risk and return.

Our AFA Perspective presents:

  • A two-by-two framework for classifying private credit segments
  • How loan size can influence potential returns
  • Why cash-flow-based versus asset-based underwriting is a fundamental dimension of risk
  • How to apply the two-by-two framework to optimize a private credit portfolio

Click here to download the white paper.


This AFA Perspective was prepared by Alternative Fund Advisors, LLC (“AFA”). AFA does not make any representations or warranty, express or implied, as to the information’s accuracy or completeness, nor does AFA recommend that the information presented serve as the basis of any investment decision. The views expressed reflect the current views as of the date hereof. This publication has been provided solely for information purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such.

AFA is the investment adviser of the AFA Private Credit Fund, a continuously offered closed-end interval fund. An investment in the Fund involves risk. The Fund’s investment in private credit securities is speculative and involves a high degree of risk, including the risk associated with leverage. Read the prospectus carefully before you invest. Investors should carefully consider the Fund’s investment objectives, risks, charges and expenses before investing. This information is contained in the Fund Prospectus and a copy may be obtained by calling 800-452-6804 or by clicking here.

Distributed by Foreside Services, LLC


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