Diversifying Private Markets Income
March 17, 2026
Why the Opportunity Set Is Broader Than Direct Lending
Private market income has become a core allocation for many RIAs and family offices. Floating-rate direct lending has offered compelling yields, strong lender protections, and historically attractive recovery characteristics relative to many forms of public credit. As a result, Business Development Companies (BDCs) and other sponsor-backed lending strategies have become widely used vehicles for accessing private credit.
That popularity is well deserved. But the current market environment offers an important reminder: private markets income should not be thought of as a single return stream. Like any asset class, it benefits from diversification.
Recent developments surrounding artificial intelligence provide a useful example of why.
Over the past year, public equity markets have increasingly debated how rapidly AI could reshape the economics of software businesses. Questions about pricing pressure, competitive barriers, and long-term growth durability have led to sharp moves in publicly traded software companies.
While private credit is structurally different from public equity, markets rarely operate in isolation. When a major sector experiences a repricing in public markets, the narrative often carries over into credit discussions, refinancing expectations, and investor sentiment more broadly.
Here are a few discovery questions for you to explore:
- How diversified is your private markets income beyond direct lending?
- What other income sources exist across private credit beyond sponsor loans?
- Where could additional diversification strengthen your private income allocation?
