For years, investors viewed public and private credit as distinct asset classes with separate risk, return, and liquidity profiles. Today, that distinction is becoming less meaningful.
As companies increasingly access both public and private sources of capital, the credit markets are converging into a larger, more interconnected opportunity set. For investors, that shift creates new possibilities, but it also requires a different way of evaluating risk and value.
During a recent discussion hosted by Loomis Sayles, investment professionals explored how the evolution of credit markets is creating opportunities across both public and private investments and why flexibility may be more important than ever.
Q: What’s driving the convergence of public and private credit markets?
A: The evolution has been building for years.
Following the Global Financial Crisis, banks reduced lending activity, creating space for alternative lenders and private credit managers to grow. More recently, higher interest rates and changing market conditions have narrowed many of the distinctions that once separated public and private markets.
Today, borrowers often view public and private markets as complementary financing sources rather than separate destinations. At the same time, investors can access similar corporate credit risk through multiple structures, creating a broader opportunity set than in the past.
Q: Does private credit still offer a premium over public credit?
A: Sometimes, but not always.
Historically, private credit offered a clear premium compared with comparable public investments, reflecting reduced liquidity and increased complexity. Today's market is more nuanced.
In some areas of the public market, investors may be able to earn comparable or even higher yields while maintaining greater liquidity. As a result, investors need to look beyond asset class labels and focus on understanding exactly what risks they are being compensated to take.
The key question is no longer "public or private?" but rather, "What am I being paid for?"
Q: Why does sourcing matter more today?
A: As markets converge, access to differentiated opportunities becomes increasingly important.
In our view, many compelling opportunities now emerge through private placements, structured transactions, or hybrid deals that blend characteristics of public and private financing. Private placements are generally available only to qualified or institutional investors.
Managers with broad relationships across issuers, intermediaries, and alternative lenders may be able to identify opportunities before they become widely available. In some cases, securities can begin as privately negotiated transactions before eventually becoming publicly traded.
Q: How should investors think about liquidity?
A: Liquidity is more complex than many investors realize.
While public markets generally offer greater liquidity than private markets, not every public security trades actively every day. Certain segments of credit markets can become less liquid during periods of stress, regardless of whether they are technically public investments.
Rather than viewing liquidity as a simple public-versus-private decision, investors should consider how liquidity, income potential, portfolio construction, and investment objectives work together.
Q: Why are interval funds attracting attention?
A: Interval funds can provide access to opportunities that may be difficult to capture in traditional daily-liquid vehicles.
By pairing periodic liquidity with a flexible investment approach, interval funds can potentially invest across public, private, and structured credit markets while maintaining a focus on income and relative value.
As the boundaries between markets continue to blur, many investors are looking for solutions that can evaluate opportunities across the full credit spectrum rather than within a single category.
Note that interval funds offer periodic rather than daily liquidity. This structure allows them to potentially invest across public, private, and structured credit markets while maintaining a focus on income and relative value. The trade-off is limited access to your money. That means that shares generally don't trade on a secondary market, and the fund repurchases only a limited percentage of shares at set intervals. As a result, investors may not be able to sell all the shares they want to when they want to.
Looking Ahead
The credit markets continue to evolve, and the distinction between public and private investing is becoming increasingly less defined.
Rather than focusing on labels, investors may be better served by evaluating opportunities based on underlying fundamentals, risk compensation, and relative value. As convergence continues to reshape the market, flexibility, research depth, and broad sourcing capabilities may become increasingly important differentiators.
