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It’s already 6 months into 2025. Many have long forgotten the goals they started the year with, but mid-year is the perfect time to reassess everything and that includes checking in with your investments. The year so far have had rising rates, volatile equities and concerns on inflation which have left many rethinking how and where they allocate capital.
Many investors are now looking beyond just stocks and bonds to improve downside protection. One solution to this is private credit.
What is Private Credit?
Private credit typically refers to non-bank lending to individuals or businesses typically through structured loans that aren’t traded on public markets. This often means that deals are done privately and exchanges higher yield for reduced liquidity.
Why 5% Is a Sensible Starting Point
For many investors, allocating 5% of their portfolio to private credit provides a balanced approach. They’re meaningful enough to enhance portfolio diversification and income but still conservative enough to maintain liquidity and limit credit risk. This is an especially important factor to consider for retail investors who might prefer to keep the bulk of their assets more liquid.
Even larger institutions have adapted this approach. A 2023 Goldman Sachs survey found that institutional investors hold an average of 5.7% of their assets in private credit, while many are targeting 7.8% [1].
Allocating a small portion (such as 5%) to private credit can be a conservative yet strategic move for investors reviewing their portfolios mid-year.
Diversification + Income
Private credit can address some of the key pain points investors have:
- Potentially Lower volatility than bonds: Private credit is less exposed to daily market swings, and its stronger deal terms, like covenant protections and direct underwriting can help provide more stability and downside protection during periods of volatility.[2]
- Attractive yields: Private credit has historically offered higher yields than traditional bonds These higher returns come with more risk and less flexibility, but they can be appealing for long-term investors. [3]
Access Matters: How Private Credit Has Opened Up to Individual Investors
Private credit has long been in the hands of institutional investors only, but that’s been changing as more and more individual investors are gaining access to this asset class. You don’t need a 7-figure net worth or access to private funds, you just need a plan and a minimum contribution.
This accessibility matters for two reasons:
- Portfolio Building: Individual investors can now benefit from the same yield potential and diversification that institutions have leaned into without relying solely on stocks, bonds, or REITs.
- Financial Inclusion: Democratizing private credit means that more Canadians can align their financial goals with real social impact. You’re getting to support your fellow Canadians while earning monthly returns in the process.
It’s a game changer for individual investors where every layer of diversification counts.
Key Factors to Consider When Investing in Private Debt
Private credit differs significantly from more conventional asset classes like equities or government bonds. It’s essential for investors to align private debt allocations with their overall financial goals, risk tolerance, and liquidity preferences. While private debt can offer attractive yields, those returns typically come with elevated risk. Investors should be aware that these instruments may lead to limited or even negative returns, and in some cases, capital loss is possible. Before including private credit in a portfolio, it’s important to assess how it fits within an investor’s broader strategy. Consulting with a financial advisor can help ensure that such investments support the desired outcomes. And as with all investing, it’s important to remember that past performance is not a reliable indicator of future results.
Final Thoughts
True diversification isn’t just about mixing stocks and bonds, it means having exposure to different sources of risk.
*Important footnote & disclaimer:
The information contained on this website and in any related materials, including but not limited to blog posts, charts, statistics, projections, or other content (collectively, the “Information”), has been prepared by goPeer for general informational and educational purposes only. The Information does not constitute, and should not be construed as, an offer to sell or a solicitation to buy any securities or investment products. The Information does not constitute legal, tax, investment, financial, or accounting advice, and should not be relied upon as such.
Any tables, charts, forecasts, forward-looking statements, or statistical analyses presented are based on assumptions, estimates, or projections made by goPeer that may not reflect actual future performance. These forward-looking statements involve known and unknown risks, uncertainties, and other factors (many of which are beyond goPeer’s control) that may cause actual outcomes to differ materially from those expressed or implied in the Information. Actual results may vary significantly, and past performance is not indicative of future results.
No portion of the Information should be interpreted as a recommendation or endorsement of any specific investment strategy, security, loan, or product. Investment decisions should always be made based on the investor’s individual objectives, financial situation, and risk tolerance, in consultation with appropriate legal, tax, and financial advisors.
Investing involves risk, including the possible loss of principal.
