Where Private Credit Fits in a Portfolio
For decades, the 60/40 portfolio has been the standard framework for long-term investors. Equities were expected to drive growth, while bonds provided income and stability. That structure has endured because, over long periods, it has worked.
What investors have also seen is that the diversification provided by traditional assets has not been consistent across market cycles. As interest rate regimes and correlations shift, portfolio construction has continued to evolve, not by replacing what works, but by building on it.
It is within this evolution that private credit has increasingly entered portfolio discussions.
Private credit, on its own terms.
Returns are driven by underwriting decisions, structural protections, and active management rather than by continuous public-market pricing.
For many allocators, this underscores an important distinction. Outcomes in private credit are shaped more by strategy design and manager discipline than by asset class labels.
How investors typically fit private credit.
When investors consider private credit within a multi-asset portfolio, the discussion is usually about sizing and substitution.
Industry research suggests that private credit allocations are commonly observed in the 5 to 20 percent range, with sizing driven by liquidity needs, time horizon, and portfolio objectives.
These allocations are most often funded from existing income-oriented exposures (typically mid-to-upper rated corporate bond exposure), reflecting how investors integrate private credit within established portfolio structures.
Furthermore, many verticals of private credit allow an investor the opportunity to achieve equity type returns, without the volatility and downside risk of equities, so a case is also warranted to make allocations from an investor’s existing equity bucket as well for those investors who are more focused overall on both protecting capital and lessening volatility.
Portfolio construction often centers on maintaining balance as exposures evolve.
Where Garrington fits.
We focus on lending where risk is managed through loan structure, asset coverage, and shorter contractual terms. Exposure is intentionally kept shorter in duration and tightly underwritten to deliver a return stream that behaves differently from that of public bonds.
From a portfolio perspective, this is intended to be a clearly defined allocation that investors can understand and size appropriately.
Closing perspective.
Portfolio construction has evolved as allocators have developed better tools and structures to manage risk and protect capital.
Private credit has earned a place in many portfolios because it introduces different return drivers and risk considerations, not because it replaces what already works.
At Garrington, the focus is straightforward: to apply fundamental credit principles in a repeatable way and to offer investors a disciplined allocation that fits within evolving portfolio frameworks.
