Private credit has traditionally been synonymous with direct lending, private loans to sponsor-backed companies outside the banking system. But that narrow lens is rapidly widening. Investors are now tapping into a much broader universe of private credit, encompassing asset-backed finance, opportunistic credit, infrastructure lending, and more.

At Carlyle, that evolution is more than conceptual; it's practical, diversified, and increasingly central to portfolio construction. “If you only think of direct lending, you’re missing the full opportunity,” says Justin Plouffe, Partner and Deputy CIO of Global Credit at Carlyle. “The broader private credit market reaches into the tens of trillions of dollars.”

As private credit garners attention from both institutional and individual investors, the tools and access points are shifting. Carolyn Boccaccio, Carlyle’s Head of U.S. Wirehouse Sales, notes growing interest from financial advisers and individual investors. “The perception is evolving. Lower investment minimums and broader access have brought this asset class into mainstream portfolios,” she says. “But many still equate private credit with direct lending alone.” This assumption overlooks the expanding scope of the market, particularly segments like asset-backed finance (ABF), which are reshaping what private credit can do.

According to Akhil Bansal, Carlyle’s Head of Asset-Backed Finance, ABF opens the door to a broad return spectrum, from investment-grade-like senior risk to high-octane, equity-like yields. That flexibility is attracting attention. “Investors are now using private credit to take illiquidity risk in the fixed income portion of their portfolios,” he explains. “ABF can suit everything from conservative allocations to opportunistic strategies.”

A case in point: Carlyle’s acquisition of a $10.5 billion portfolio of private student loans from Discover. The deal was driven not by price maximization, but by execution certainty and deep sector expertise. Carlyle’s proprietary data on student borrowers and active portfolio management, including parent engagement on delinquencies, drove value beyond traditional credit underwriting.

Plouffe sees diversification across credit strategies as a key edge. “We’re built to go where the value is, not just direct lending but also niche and emerging sectors,” he says. Carlyle’s evolution from CLOs and leveraged loans to direct lending, ABF, aviation, and infrastructure reflects a market where deal flow and risk-adjusted returns move across sectors. With banks pulling back from balance-sheet lending and private markets maturing, private credit is becoming more central to institutional asset allocation.

Fifteen years ago, says Plouffe, credit sat on the fringes of portfolios. “Today, it’s a core holding, fixed income plus. And institutions are asking: what else is there?”

Not all areas offer equal value. Large-cap sponsor loans, for example, are now highly competitive and feature tighter spreads. “That’s still good relative value versus public markets,” Plouffe says, “but if you’re not established, it’s hard to break in.” The future lies in the ability to pivot, to source unique deals, structure them creatively, and maintain underwriting discipline. “There’s always something to do in private credit,” he concludes. “You just have to know where to look.”

Investors who move beyond the traditional view of private credit as solely direct lending can unlock new sources of yield, diversification, and resilience. As private credit matures, so too must the way professionals engage with its rapidly broadening potential.

Author: Asset TV
Source: Video - Private Credit Masterclass: Why Diversification Matters Now
www.assettv.com/video/private-credit-masterclass-why-diversification-matters-now