The second episode of “Offshore Offscript” explores one of the fastest-growing investment categories globally: offshore private credit, with a particular focus on the European market and its relevance to South African and international investors. The session, led by hosts from FedGroup, features expert perspectives from Greg Goeller, Head of Structuring and Lending at FedGroup, and Jean-Baptiste Magnen, Managing Partner at Chetwode in Paris. Their discussion revolves around the definition of private credit, the structural forces driving its growth, and the strategic benefits it offers within modern portfolio construction.
Private credit, as defined in the discussion, is non-bank, unlisted lending. Unlike traditional bank finance, private credit operates outside of the regulated banking environment and fills the gap banks increasingly leave behind—particularly for small and medium-sized enterprises (SMEs). FedGroup has engaged in private credit for over 35 years in the South African property, Agri, Renewable Energy, and Private Capital sectors, but the global expansion into Europe represents a major opportunity due to broader deal flow, diversification benefits, and exposure to stronger hard-currency economies.
A central driver behind the global rise of private credit was the 2008–2009 financial crisis, which led to far more restrictive banking regulations (Basel rules). European banks subsequently pulled back from medium- and long-term SME financing, creating a persistent supply gap. A second catalyst came in 2012, when European regulations changed to allow life insurers to invest directly into economic activity, including lending to SMEs. These structural shifts enabled the private credit market to scale significantly and professionalize over time.
Today, private credit represents roughly 5% of the global listed equity market, up from less than 1% a decade ago—a remarkable expansion in such a short period. This growth reflects both demand and performance. Investors increasingly seek stable, predictable income, particularly in volatile or uncertain equity markets. Because private credit involves negotiated loan agreements with fixed returns and defined amortization schedules, it provides stable yield with generally lower correlation to traditional asset classes.
The specific niche FedGroup and Chetwode focus on lies in the €1 million to €20 million deal range, an underserved segment in Europe. Banks primarily target very small (<€1 million) or very large (>€20–30 million) deals, but the mid-market remains chronically underfunded. This is meaningful in Europe, where up to 95% of businesses are owner-managed SMEs, compared to about 75% in South Africa. These companies form the backbone of European economic activity and require flexible financing solutions that private credit providers can offer.
A defining characteristic of the strategy is its emphasis on asset-backed finance—loans secured against essential, “critical” operating assets that are fundamental to a company’s functioning. The podcast illustrates this using concrete examples such as:
By financing or refinancing these essential assets through leases, sale-and-leaseback agreements, or instalment finance, providers generate working capital for SMEs while maintaining strong collateral security.
Risk management occupies a central role in the approach. Asset-Backed Private credit risk hinges on two factors: probability of default (quality of the borrower) and loss given default (value of recoverable collateral). Many of the companies financed in this niche carry strong credit profiles, often stronger than publicly listed institutions in South Africa. To further reduce risk, loan-to-value ratios are typically kept below 70%, and assets selected are generally non-specialised, ensuring they can be resold easily in secondary markets. Additionally, deal teams perform on-the-ground due diligence, physically visiting sites and performing prospective valuations for the full lifespan of the financing.
Liquidity is also addressed: private credit is inherently less liquid than listed markets due to the contractual nature of lending. However, in a diversified fund, natural loan amortization and inflows create internal liquidity for periodic investor redemptions. This illiquidity, in turn, justifies the liquidity premium investors earn through higher yields.
The discussion transitions to the importance of making private credit accessible to South African investors. Historically, this asset class was restricted to institutional investors due to high minimum investment thresholds and regulatory complexity. FedGroup’s new Enhanced Global Private Credit Portfolio, wrapped within an endowment structure, enables investors to access these offshore opportunities using rand-denominated contributions with tax-efficient benefits. While alternative direct offshore structures remain available for higher-capacity investors, the core goal is to democratize access to a normally exclusive asset class.
From a strategic perspective, private credit offers several portfolio advantages:
On the risk–return curve, private credit typically sits between traditional bonds and private equity—higher yielding than investment-grade credit but below equity or unsecured private lending. Its diversification properties make it particularly attractive within a balanced global portfolio.
The episode closes by reinforcing the alignment between FedGroup and Chetwode around deep asset expertise, responsible structuring, and substantial on-the-ground due diligence. The partners emphasize that private credit is evolving into a mainstream component of diversified portfolios worldwide and is poised to play a significant role in long-term wealth planning for globally oriented investors.
