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Private credit has moved beyond the phase where broad exposure alone could do most of the work. In the decade through the end of 2024, first-quartile private credit returns outpaced third-quartile returns by more than five percentage points each year on average, highlighting the material importance of manager selection.
As credit conditions become more selective, investors should identify managers with attributes associated with long-term resilience. Sourcing depth, underwriting rigor, portfolio construction and aligned interests can provide valuable insight into investment discipline consistency and resulting outcomes. Entry leverage, covenant protections, PIK usage and workout performance can offer further evidence of how a portfolio may respond under stress.
Explore why selecting private credit managers is not about adding more relationships, but about choosing deliberately, conducting deeper diligence and identifying managers with the breadth to manage complexity without compromising underwriting standards.
References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. The securities referenced may or may not be held in the portfolio at the time of publication and, if such securities are held, no representation is being made that such securities will continue to be held.
The views expressed herein are those of PGIM investment professionals at the time the comments were made, may not be reflective of their current opinions, and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. Neither PFI, its affiliates, nor their licensed sales professionals render tax or legal advice. Clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation. Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy.
Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.
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