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Why Private Credit?

Benefits of Private Credit

Income

  • Less liquid private credit provides investors with the opportunity to capture an illiquidity premium. 1
  • Floating rate feature offers natural hedge in a rising rate environment. 2
  • Contractual loan covenants provide income visibility. 3

Attractive risk-return profile

  • Historical returns have had lower volatility in periods of elevated volatility. 4
  • Supply/demand dynamics provide flexibility to pursue opportunities across the credit spectrum.
  • Historically has generated attractive risk-adjusted return relative to traditional fixed income investments. 4

Diversification

  • The breadth of potential loans offer a diverse spectrum of industry exposures and risk/return profiles.
  • Lower correlations to traditional fixed income solutions. 4
  • Covenants and governance protections in place to manage default risk. 3

Risk-Adjusted Returns4

10-Year Fixed Income Risk and Return (%)
 

Useful Diversifier4

Correlations: to Investment Grade Bonds (10 Years, Annualized)
 

Private credit can offer more features compared to public fixed income

 

Franklin BSP Private Credit Strategy

Our multi-strategy approach offers diversification across multiple credit focused strategies utilizing BSP’s extensive experience deploying capital through multiple business cycles.

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Real
Estate

Debt & equity investments in commercial real estate with a focus on the middle market

Private Debt/Direct Lending

Provides loans to middle market companies with flexibility to move up and down the capital structure in order to capture what BSP believes to be the best risk adjusted return

Liquid High Yield

Focuses on liquid, traded investments in the leveraged finance market, including high yield bonds and leveraged loans

Structured Credit

Debt & equity investments in structured credit vehicles, predominately Collateralized Loan Obligations (“CLOs”)

Special Situations

Targets credits or companies that may be facing financial stress or become distressed

Multi-Strategy Credit Expertise

Flexibility to invest across the capital structure and multiple credit strategies to take advantage of attractive risk-adjusted returns

Income Generating Potential

Floating rate instrument provides flexibility to manage the risk of rising inflation and higher interest rates

There can be no assurance the Franklin BSP Private Credit Strategy will be able to implement its strategy, achieve its investment objectives, find investments that fit these criteria or avoid substantial losses. The statements above reflect Franklin BSP’s views and opinions as of the date hereof and not as of any future date and will not be updated or supplemented.

Learn more about the Franklin BSP Private Credit Strategy

Contact a Franklin Templeton Advisor Consultant on (800) DIAL-BEN / 342-5236

We’ll connect you with the team covering your region

Investment process5

The strategy aims to invest primarily in US senior secured private debt, including a combination of traditional direct lending, opportunistic/rescue lending, high-yield, liquid loans and real estate debt.

 

BSP strengths at-a-glance

Our established teams offer a broad spectrum of investment capabilities across private credit, special situations, structured credit and commercial real estate credit with multi-functional credit markets expertise.

Insights

AUGUST 25, 2025

Public insights on private credit: The art of vintage selection

Benefit Street Partners believes private credit managers need to focus on the financial conditions during a fund’s investment period. Skilled managers know when to dynamically deploy more capital or pull back, as the weather changes.

JANUARY 10, 2025

The maturity dilemma: Analyzing potential outcomes for maturing CRE loans

The maturity of a commercial real estate loan represents a pivotal moment for borrowers, lenders, and investors. Richard Byrne, President of Benefit Street Partners, explores the implications.

NOVEMBER 14, 2024

CRE Debt’s Edge over CRE Equity and BDCs

BSP President, Richard Byrne believes savvy investors should look beyond short-term market fluctuations and focus on the long-term advantages of CRE debt over equity and BDCs, as the true benefits are likely to unfold over the coming years rather than just a few quarters.

Footnotes

  1. The excess return for locking up illiquid assets for an extended period of time.
  2. Source: Bloomberg. As of March 31, 2024.
  3. Covenants protect against prepayment risks with call protection, allowing a degree of predictability regarding the term that the income stream will be available. Financial maintenance covenants give lenders the ability to compel the company to take remedial actions, such as paying down debt or increasing liquidity, in the event the financial performance starts deteriorating.
  4. Source: Franklin Templeton, Cliffwater, Morningstar, Bloomberg, Macrobond. As of March 31, 2024. The indices used are Cliffwater Direct Lending Index for Private Credit, Morningstar LSTA US LL TR USD Index for Leveraged Loans, Bloomberg Corporate High Yield Index for US High Yield, Bloomberg US Aggregate Bond Index for US Bonds. This information is provided for illustrative purposes only. Hypothetical portfolio results shown do not represent the performance of an actual investment. The results are rebalanced quarterly and assume reinvestment of ordinary income and distributions. The results do not reflect a deduction of fees, taxes, and other expenses, if any, which would reduce performance.
  5. For illustrative purposes only. Any descriptions involving investment process, portfolio characteristics, investment strategies, goals or risk management are provided for illustration purposes only, are not complete, will not apply in all situations, may not be fully indicative of any present or future investments and may be changed in the discretion of the Strategy. No representation is made that the Strategy’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or successful. Investment philosophy information reflects general guidelines that may be amended from time to time by the Strategy without prior notice to investors. The Investment Committee’s of each asset class is responsible for deal commitment, with portfolio managers will allocating to the Franklin BSP Private Credit Strategy.

The information presented is considered reliable at the present time; however, we do not represent that it is accurate or complete, or that it should be relied upon as such. Speculation or stated beliefs about future events, such as market or economic conditions, company or security performance, upcoming product offerings or other projections represent the beliefs of the speaker and do not necessarily represent the views of Franklin Templeton Investments Corp. General business, market, economic and political conditions could cause actual results to differ materially. The information presented is not a recommendation or solicitation to buy or sell securities.

Investment Risks:

An investment in the Strategy involves a considerable amount of risk. The Strategy is designed primarily for long-term investors, and an investment in the Strategy should be considered illiquid. Shareholders may not be able to sell their shares in the Strategy at all or at a favorable price. Fixed income securities involve interest rate, credit, inflation and reinvestment risks. As interest rates rise, the values of fixed income securities fall. High-yield bonds possess greater price volatility, illiquidity and possibility of default. The Strategy’s investments are highly  concentrated in real estate investments, and therefore will be subject to the risks typically associated with real estate,  including but not limited to local, state, national or international economic conditions; including market disruptions caused by regional concerns, political upheaval, sovereign debt crises and other factors. Asset-backed, mortgage-backed or mortgage-related securities are subject to prepayment and extension risks. The Strategy employs leverage, which increases the volatility of investment returns and subjects the Strategy to magnified losses if an underlying fund’s investments decline in value. The Strategy may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Strategy performance.

Concentration Risk: An investment should be considered long-term within a multi-asset portfolio and should not be viewed individually as a complete investment program.

Liquidity Risks: An investment in the Strategy should be considered illiquid. An investment in this Strategy is not suitable for all investors.  

Fixed Income (Bond Investing) Risks: Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.

Derivatives Risk: Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on performance.  

Private Credit Investment Risks: Private credit investments can be similarly impacted by interest rates as publicly offered fixed income securities. Additionally, privately offered credit investments including private debt and loans are suitable only for investors who can bear the risks associated with private market investments (such as private credit and private equity) with potential limited liquidity. Shares will not be listed on a public exchange, and no secondary market is expected to develop. Assessing the value of privately offered credit investments can be hindered by a lack of available information and depend on representations made by the borrower. There can be no assurance that such representations are accurate or complete, and any misrepresentation or omission may adversely affect the value of such investments

Leveraged loans investment risks: Leveraged Loans carry similar risks as private credit investments, but carry a higher degree of risk, since borrowers typically have high levels of debt and/or a low credit rating. Due to the higher risk associated with these loans they typically pay higher interest rates, but also carry a higher risk of default.

Fixed income investment risks (including government securities): Bond prices generally move in the opposite direction of interest rates. As the prices of bonds in the strategy adjust to a rise in interest rates, the strategy’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. High yield bonds (or junk bonds rated CCC and lower) may carry a higher interest rate than investment grade bond, but are subject to greater price volatility, illiquidity, and possibility of default.

BEFORE INVESTING, CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES.

All investments are subject to risk, including the possible loss of principal.