Why Private Credit?

Why Private Credit?

Private credit refers to non-bank lending, where capital is provided directly to borrowers outside the traditional banking system. The asset class has experienced exponential growth in the wake of the global financial crisis, as regulatory constraints limited banks' ability to lend — creating a structural opportunity for alternative capital providers.

Today, private credit has become a highly sought-after segment of the market, attracting leading institutional managers who are shifting away from traditional fixed income and toward floating- rate, collateral-backed strategies that offer enhanced yield and lower interest rate sensitivity.

Adnate Capital seeks to democratize access to this evolving asset class. Through Adnate Credit Opportunities Fund I (ACOF I), we aim to deliver strong, risk-adjusted returns with meaningful downside protection, giving investors exposure to senior secured credit in U.S. middle market companies — a segment defined by durable cash flows and strong structural protections.

Why Is Private Credit Attractive Now?

Private Credit's Rapid Expansion: The asset class has grown from ~$100 billion in 2000 to over $2 trillion by 2024, fueled by the retreat of traditional bank lenders and rising institutional demand.

Attractive Risk-Adjusted Returns: Private credit offers higher yields than public fixed income, with lower volatility, senior secured positioning, and protection against rising rates through floating-rate structures.

Compelling Market Tailwinds: Inflation, higher interest rates, and evolving borrower needs continue to drive robust growth, with private credit AUM projected to surpass $3 trillion by 2028.

Accelerating Institutional Adoption: Investors are increasing allocations to private credit for diversification, downside protection, and stable, recurring income streams.

The estimated size of the private credit market as of the end of 2024.
$ 2.1 T+
The potential addressable market for private credit.
$ 30 -40T
Average annualized quarterly income return.
9.9 %
Historical recovery rates for senior secured exposures.
60 -70%

How Has Private Credit Performed?

Private credit has consistently outperformed traditional fixed income, delivering attractive risk-adjusted returns across market cycles.

Low Volatility

Historically, lower volatility than public high-yield bonds and equities, driven by senior secured positioning and private market protections.

Resilience Across Cycles

Demonstrated strong downside protection during periods of economic stress, including the Global Financial Crisis and COVID-19 dislocation.

Superior Recovery Rates

Senior secured private loans have historically achieved higher recovery rates than unsecured high-yield bonds, enhancing principal protection.

Attractive Risk Premium

Offered an illiquidity premium over public markets, rewarding investors with higher yields and stable cash flows in exchange for longer investment horizons.

Source: Cliffwater Direct Lending Index (CDLI), Bloomberg High Yield Bond Index, Morningstar LSTA US Leveraged Loan Index, Bloomberg Aggregate Bond Index, Bloomber1-3 Month T-Bills.

How Resilient is Private Credit?

Senior secured private credit has delivered historical recovery rates of 65–70%, significantly outperforming unsecured high-yield bonds, which average around 40% recovery (Moody’s, 2024).

Higher recoveries are driven by first lien seniority, strong collateral packages, tight loan covenants, and direct negotiation rights that allow lenders to exert greater control during workouts or restructurings.

OPPORTUNITIES & RESOURCES

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Risks

ACOF1 is an open-ended investment vehicle managed by Adnate Capital, designed primarily to target private credit investments, including direct origination of loans and related debt instruments issued by privately held U.S. companies. Investing in ACOF1 involves substantial risk and is intended solely for sophisticated investors who understand and can accept significant illiquidity and volatility. Prospective investors should carefully review the risk factors outlined below and further detailed in our PPM:
  • An investment in ACOF1 is illiquid and should not be pursued if immediate or near-term access to invested capital may be necessary.
  • Investors should anticipate no secondary market for shares, and shares will not be listed on any securities exchange.
  • Withdrawals may, at times, be funded from offering proceeds or borrowings, potentially returning investors’ capital rather than generated income. This could reduce capital available for future investment after accounting for fees and expenses.
  • The use of leverage in our investment strategy magnifies potential investment returns and risks. Debt holders will have priority claims over equity investors in ACOF1, potentially exacerbating losses in asset values or net income during downturns.
  • Our focus on privately held companies means limited public information and greater vulnerability to economic volatility and operational inconsistencies.
  • For further details and to review our regulatory disclosures, please consult the company’s brochure filed with the US SEC available at the following link.

Legal Disclaimer

Adnate Capital does not represent or warrant, expressly or implicitly, the accuracy, completeness, fairness, or reliability of the information provided herein, including
information obtained from third-party sources. Adnate Capital expressly disclaims all responsibility or liability associated with reliance on this information and does not
undertake any obligation to update or revise any information contained herein.

Investment in ACOF1 is speculative and involves significant risks, including but not limited to limited operating history, volatile performance, the use of leverage, limited
liquidity without an expected secondary market, restrictions on transferability of interests, high fees and expenses, and substantial reliance on the investment judgment and
discretion of Adnate Capital. Investors should thoroughly evaluate all risks outlined in the applicable offering documents before investing. No assurances can be given that
investment objectives will be achieved. The investment strategies described herein should not be viewed as conservative, risk-free, or risk-averse. Economic, market, and other
external factors may lead ACOF1 to modify its investment objectives and guidelines, and investment losses are possible.

Past performance is not indicative nor a guarantee of future results.
This document may reference trademarks, service marks, or trade names of third-party entities. Such references do not imply any affiliation, sponsorship, endorsement, or association between these third-party entities and Adnate Capital.
Recipients of this material agree to observe all applicable laws and regulations concerning its use and distribution. This document is not intended for distribution or use by any person or entity in jurisdictions where such use would violate applicable laws or regulations. Additional information dissemination may also be subject to further jurisdictional restrictions.
Nothing in this disclaimer shall restrict or prohibit any individual from communicating directly with the U.S. Securities and Exchange Commission or other regulatory authorities concerning potential securities law violations.
For further details and to review our regulatory disclosures, please consult the company’s brochure filed with the SEC available at the following link.

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