Christopher Zook leads Houston-based CAZ Investments, which manages $8 billion in assets across private markets in energy, general partner stakes, private credit, real estate and professional sports. He talked with Crain Currency about the appeal of private credit and what strategies make the most sense when the markets are volatile.
Why has private credit become such an attractive income stream for wealthy investors?
Private credit has emerged as one of the fastest-growing asset classes, driven by a unique convergence of market conditions and structural advantages. The segment is supported by two powerful tailwinds: (1) the explosive growth of private assets requiring debt capital to fuel growth and acquisitions, and (2) the strategic retreat of traditional banks following post-2008 great financial crisis regulations.
With fewer banks competing to provide credit, private lenders occupy a stronger negotiating position, often securing enhanced yields alongside meaningful structural protections. This combination of high income and risk mitigation has consistently translated into superior results relative to traditional fixed income. Across virtually every long-term time horizon, private debt has outperformed traditional fixed income by a substantial margin.
In addition to return potential, private credit enhances a portfolio’s durability. Most loans are structured with floating interest rates tied to short-term benchmarks like the secured overnight financing rate (SOFR), allowing yields to rise in step with market rates. This is unlike fixed-rate bonds, which typically lose value as rates climb. Shorter durations in private credit loans also support timely repositioning in dynamic markets, for lenders and borrowers alike.
How has the asset class performed in recent years?
Perhaps most important, private credit has demonstrated remarkable consistency through downturns. From 2004 to 2022 — a period that included both the global financial crisis and the COVID pandemic — loss rates averaged just 1% annually, underscoring the strategy’s resilience.
Together, these features give private credit a unique return profile, resulting in low correlation with public equities, traditional bonds and other alternatives. The combination of consistent high income, outsized relative returns, capital preservation and meaningful diversification benefits is understandably appealing. For many investors, it has become a strategic anchor in both growth-oriented and defensive portfolio constructions.
How have family offices in particular increased their interest in private credit as an asset class?
Family offices have emerged as natural adopters of private credit, leveraging their flexibility and long-term mindset to capitalize on the unique advantages the asset class possesses. We have seen a clear trend within our network — family offices increasing their exposure from low single digits to materially higher allocations, reflecting a broader strategic reassessment of how to source yield and manage risk in today’s environment.
Three characteristics make private credit particularly well-aligned with family office portfolios:
1. The ability to generate high, consistent income with low volatility complements the wealth preservation mandates that drive multigenerational decision-making.
2. Manager selection is paramount in private credit, where almost everything hinges on credit underwriting and deal access. Family offices that partner with established credit firms having deep relationships with private equity managers gain privileged access to capacity-constrained strategies that can meaningfully enhance portfolio returns.
3. Many family offices now bring a level of sophistication and speed to the space that allows them to participate in more specialized strategies as both capital providers and strategic liquidity seekers. We are seeing growing interest in NAV-based financing solutions, for example, where family offices operate on both sides of the transaction — as portfolio principals seeking efficient capital solutions from legacy alternative investments and as lenders capitalizing on that demand through thoughtfully structured, asset-backed lending opportunities.
What are private credit strategies that make the most sense, given the current market volatility and global trade tensions?
When uncertainty grows in the economy and markets, it typically leads to greater opportunities in private credit. Once again, we have seen traditional correlations falter in times of turmoil as everything converges. The massive treasury market volatility, with rates rising in spite of the broader market sell-off, underscores the importance of having a diversified fixed-income allocation.
Certain private credit strategies emerge as compelling defensive positions in this new paradigm. One is NAV-based lending, which can provide exceptional downside protection precisely when traditional portfolio hedges are failing. This strategy often targets conservative 10% to 30% loan-to-value ratios, creating substantial margins of safety while targeting 4% to 7% returns above T-bills independent of public market gyrations. The dramatic treasury market movements further reinforce the value of low-leverage secured lending against diversified private market assets.
Floating-rate credit structures also offer natural insulation against interest rate volatility while eliminating duration risk. These instruments, typically featuring SOFR plus 3% to 7% spreads and embedded SOFR floors, deliver attractive risk/return profiles regardless of rate direction. This design creates a powerful portfolio component that remains resilient even as traditional correlation assumptions between stocks and bonds break down.