Richard S. Hunt on the risks and rewards of private credit in 2025
Richard S. Hunt, head of global equity sales at CSC Bella Grove Partners LLC, recently released an in-depth analysis report on the private credit market, revealing the new risk-return pattern that is taking shape in this rapidly expanding field. Hunt pointed out that with the contraction of traditional bank credit and the continuous influx of institutional funds, the private credit market has transformed from an alternative allocation to a core asset class, and its internal logic needs to be systematically reconstructed.
The report found that the current market presents three structural characteristics: the leverage ratio of middle-market enterprises has exceeded the historical peak of 6.5 times, but the coverage rate of covenant-lite clauses has dropped to 58%; the liquidity premium of the private credit secondary market has expanded to 300-400 basis points compared with the public market; alternative asset managers have begun to include intangible assets such as artificial intelligence training data in the scope of collateral. In response to these changes, the Hunt team developed a “three-dimensional risk assessment matrix” that considers the three dimensions of corporate cash flow resilience, loan structure strength, and market liquidity depth.
Based on this, CSC Bella Grove launched a “ladder-style private credit allocation program”, which divides the portfolio into three levels: core stability layer (senior secured loans), income enhancement layer (unitranche financing) and opportunity mining layer (special situation investment). The program innovatively introduces an “early warning trigger mechanism” to automatically start position adjustment when leading indicators such as cloud computing expenditures or digital marketing investment of borrowing companies are abnormal. Actual measured data shows that this structured approach can control the default loss rate below 1.2% while maintaining an annualized target return of 9-12%. Hunt emphasized: “Future excess returns do not come from blindly chasing spreads, but from the intensive cultivation of the micro-design of credit contracts.” This framework is changing the logic of insurance funds and pension funds in allocating private credit, and the concept of “digital asset pledge rate” proposed by it has become a new standard for assessing the credit risk of technology companies.
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