Traditional fixed income assets – such as government bonds and money market instruments – remain important but are no longer sufficient on their own. Equity markets are unpredictable, and cash often fails to keep up with inflation.
As a result, more planners are looking for alternatives. Private credit, particularly in the South African context, is gaining attention. It offers investors the chance to earn reliable income by lending to growing businesses, while also supporting the real economy.
Why private credit matters—especially in South Africa
South Africa has a well-developed financial system, but traditional lenders, especially banks, are cautious when it comes to small and medium-sized enterprises (SMEs). Many viable businesses are unable to access capital, even when they have stable revenues and sound management teams.
This creates an opportunity for private credit funds, which provide tailored loans to these businesses. These loans are usually short- to medium-term, backed by assets or contracts and structured to reduce risk for investors. The benefits for local investors are clear:
- Attractive returns. Private credit in South Africa often targets returns well above inflation and money market investments.
- Built-in protections. Loans are structured with security, guarantees or cash flow-based repayments.
- Low correlation to public markets. Returns are driven by real business activity, not stock or bond market movements.
- Tangible impact. Lending directly to SMEs helps grow businesses, create jobs and support economic development.
Aligning capital with purpose
Another growing theme among investors is purpose. Many clients realise that their quality of life is driven not just by the growth in their wealth, but also by the development of the communities they plan to live and retire in.
Private credit is well suited to this. By financing businesses in sectors like logistics, healthcare, manufacturing or agriculture, investors can support inclusive economic growth in their local communities. These outcomes are measurable, and often visible – jobs created, social stability and thriving economic hubs.
For advisors, this provides a way to meet both financial and non-financial objectives in a single product. The challenge is that most private credit offerings in South Africa focus on offshore exposure instead of investing in local communities.
A potential solution: the Altvest Credit Opportunities Fund
The Altvest Credit Opportunities Fund (ACOF) is an example of a local private credit fund that focuses on SME lending. It provides secured, structured loans to South African businesses with strong fundamentals but limited access to traditional credit. Some of the fund’s key terms:
- Attractive returns [26% IRR for equity investors and prime +2% for debt investors via listed and regulated instruments]
- Semi-annual income distributions for debt investors
- Robust collateral and risk management built into every transaction
- Meaningful manager co-investment
ACOF is open to all investors, via direct investment and/or wrapped products. It is particularly suitable for those seeking alternatives to listed bonds or income funds, and who are comfortable with a medium-term investment horizon.
A new tool for South African advisors
For financial planners, private credit adds value as part of a well-diversified portfolio. It does not substitute for traditional assets, but it does offer important benefits: stable income, local economic exposure and measurable impact.
The key is careful manager selection. Not all private credit is created equal. Advisors should look for funds with clear investment criteria, strong credit processes and transparency in reporting.
South African private credit, like ACOF, offers something rare: the ability to earn attractive returns in rands, support the real economy and reduce reliance on volatile public markets. In a time of uncertainty, it is a tool worth serious consideration.
Akshay Karan, Chief Investment Officer, Altvest
