Private debt refers to non-public lending arrangements between investors and companies, typically outside of traditional banking channels. In Swiss private banking and independent wealth management, private debt has gained traction as an alternative fixed-income strategy. It provides access to higher yields, floating-rate structures, and direct exposure to credit risk – often within a tailored and illiquid format.
Swiss institutional investors, family offices, and qualified private clients include private debt to diversify income streams, enhance returns, and reduce reliance on public bond markets. The asset class is commonly accessed via feeder funds, direct lending platforms, or Actively Managed Certificates (AMCs) that wrap the underlying loans into bankable formats.
Key Private Debt Strategies
- Direct Lending: Senior or unitranche loans to mid-market companies, often with floating interest rates
- Mezzanine Debt: Subordinated lending that bridges the gap between equity and senior debt
- Distressed Credit: Buying debt of companies in financial distress, aiming for restructuring upside
- Special Situations: Flexible capital used in niche or transitional funding environments
These strategies offer different return profiles, risks, and liquidity characteristics. Therefore, diversification across strategies and regions is critical.
Accessing Private Debt via Swiss Platforms
Swiss wealth managers facilitate access to private debt through:
- Feeder funds: Provide participation in institutional lending portfolios
- Co-investment platforms: Offer direct access to specific credit transactions
- AMC wrappers: Enable custody-compatible exposure with ISINs, e.g. via GenTwo
- Club deals: Multi-family-office syndications in bespoke lending structures
AMCs in particular allow private debt exposure to be held within standard bank portfolios, improving liquidity and visibility while maintaining flexibility.
Benefits of Private Debt
- Attractive yield: Often higher than public bonds, with lower volatility
- Floating-rate structure: Provides inflation protection in rising rate environments
- Portfolio diversification: Returns driven by credit risk rather than market beta
- Customisation: Ability to target sectors, geographies, and maturities
Risks and Considerations
- Illiquidity: Commitments often range from 3–7 years with limited exit options
- Credit risk: Borrowers may default, requiring active monitoring
- Valuation opacity: Assets are not marked to market daily
- Complex structuring: Requires legal and operational due diligence
Private Debt vs Bonds and Private Equity
| Feature | Private Debt | Public Bonds | Private Equity |
|---|---|---|---|
| Return driver | Credit spread / income | Yield / duration | Capital growth |
| Liquidity | Low (3–7 years) | High (daily) | Low (7–10 years) |
| Risk type | Credit / borrower | Market / rate | Execution / exit |
| Access model | Fund / AMC / direct | Listed securities | Feeder / AMC / co-investment |
Who Uses Private Debt?
- Family offices seeking stable, income-producing alternatives
- UHNWI aiming to diversify credit exposure away from traditional bonds
- IAMs allocating to niche credit segments via AMCs or club deals
Example Allocation
In a CHF 10 million portfolio, an investor might allocate:
- 5% senior direct lending via a private debt fund
- 3% mezzanine credit in European SMEs through a feeder vehicle
- 2% special situations via a bespoke AMC structure
This allocation introduces yield, floating-rate income, and diversification into an otherwise liquid portfolio framework.
Conclusion
Private debt serves as a compelling alternative to public fixed income in Swiss wealth management. With rising interest rates and demand for stable returns, its relevance is increasing. When structured thoughtfully – whether via funds, AMCs, or club deals – private debt enhances portfolio income while preserving strategic flexibility for sophisticated investors.
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