The MSCI Private Credit Factor Model
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Private-credit strategies have surged in terms of assets under management over the past decade, attracting institutional allocators and, increasingly, retail investors seeking yield, floating coupons and (seemingly) low volatility. Yet investors and risk teams face three persistent challenges when integrating private credit into the total plan:
- Opacity: Limited fund data makes risk exposures difficult to assess.
- Illiquidity: Private valuations mask volatility and understate both long-run correlation and tail risk.
- Inadequate proxies: High-yield or leveraged-loan benchmarks fail to capture the distinctive strategies, structures and investor behaviors that truly drive private-credit outcomes.
These gaps distort total-plan risk, stress testing and strategic asset allocation.
The MSCI Private Credit Factor Model, built on the foundation of MSCI Private Capital Solutions’ extensive data, gives allocators, managers and risk teams the tools they need to manage private-credit allocations in the context of the total plan. Designed with flexibility at its core, the model accommodates both top-down strategy-level modeling of private-credit funds and their holdings, as well as, for corporate loans, granular bottom-up analysis with fixed-income valuation techniques, all enhanced by private-credit-specific risk factors. As a market-risk and allocation tool, it complements the credit-risk-focused MSCI | Moody’s Private Credit Risk Assessment offering, whose implied ratings can be used to shape factor exposures.
Cumulative return of the different corporate risk strategies by region. Only buckets with at least five funds for more than 10 years of history are included. U.S. leveraged loan is added for reference. Source: MSCI, iBoxx USD Leveraged Loan Index
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