Why private credit remains a strong opportunity
What is Private Credit?
Private credit has surged in popularity, with assets under management growing at an annualized rate of 14.5% over the past decade. The appeal is clear: consistent returns, healthy yields, and lower volatility, thanks to secured structures and historically low credit losses.
While some investors worry that an economic slowdown, persistent inflation, or “higher for longer” interest rates could challenge private credit, we believe these concerns are overstated—particularly when strategies are focused on niche, asset-backed markets. Unlike broad corporate lending, private credit in specialized sectors like dog boarding kennels remains underpenetrated and resilient, supported by stable demand and tangible collateral.
The Canine Capital Private Credit Debt Fund is built on this foundation. By targeting a $20 billion financing void in the boarding-kennel-business sector, we combine elevated starting yields with first-lien security and real estate-backed loans. This creates a portfolio that is both insulated from systemic risks and positioned to deliver fixed, reliable income.
In our view, senior secured direct lending—when applied with industry expertise and diversification—remains one of the most resilient strategies across economic cycles. The Canine Capital Fund harnesses those advantages in a sector investors already know and trust, transforming a financing gap into a durable investment opportunity.
Private credit growth – meaningful but not detrimental.
The growth of private credit has significantly outpaced other fixed-income asset classes. Over the past decade, corporate borrowing has expanded at roughly 5.5% annually, and commercial and industrial bank loans at just 3%. In contrast, private credit has surged at an annualized rate of 14.5%, transforming from a niche segment into a major force in capital markets.
Today, private credit is nearly as large as the public high-yield bond market and more than half the size of commercial and industrial lending by banks. Yet it still represents only about 9% of total corporate borrowing—a scale far too small to create systemic risk even in a recessionary environment. While critics point to rapid growth as a potential concern, the reality is that private credit remains a modest portion of the broader credit universe, and fundraising momentum has already begun to stabilize.
For the Canine Capital Private Credit Debt Fund, this context is critical. While some question whether the overall asset class can continue delivering double-digit returns at scale, the Fund is targeting a $20 billion financing void in the boarding-kennel sector—an industry overlooked by banks and untapped by institutional credit markets. By focusing on this underpenetrated niche, supported by real estate collateral and consistent consumer demand, the Canine Capital Fund offers investors a sustainable pathway to attractive returns without relying on crowded or overexposed segments of private credit.
Resilient returns – so far.
Senior direct lending has proven to be one of the most resilient strategies in private credit, even in environments of slower growth, higher interest rates, and elevated inflation. The resilience comes from three factors: attractive starting yields, seniority in the capital structure, and portfolio diversification. Historically, senior direct lending has shown remarkable consistency—since 1992, broadly syndicated loan markets, which serve as a proxy, have only posted negative returns in three years.
The Canine Capital Private Credit Debt Fund builds on this strength by applying the same principles to the $20 billion dog boarding kennel sector. Each loan is secured by real estate and cash-positive kennel operations, giving the Fund senior lien protection and tangible collateral. By focusing on borrowers with proven occupancy histories and a minimum of $125,000 in net operating income, the Fund ensures that repayment capacity is built into the underwriting from day one.
While the broader private credit market includes riskier segments with weaker fundamentals, the Canine Capital Fund is insulated by its industry specialization and strict governance requirements. Kennel operators must provide full transparency through point-of-sale systems and revenue oversight, ensuring strong controls compared to many middle-market borrowers. This disciplined approach not only reduces credit risk but also positions the Fund to deliver fixed, reliable returns across economic cycles.
Our Outlook.
We believe senior direct lending is a strategic core holding and should remain resilient across economic cycles. This resilience is supported by today’s higher starting yields, the asset class’s value as a portfolio diversifier, and the protection of seniority within the capital structure. In fact, for high-quality managers, the combination of default rates exceeding 6% and recoveries below 40%—the point at which negative total returns emerge—has historically been extremely rare.
The Canine Capital Private Credit Debt Fund builds on these fundamentals by targeting a $20 billion financing void in the dog boarding kennel industry. With loans secured by kennel real estate and cash-positive operations, our Fund delivers elevated, fixed yields with strong downside protection. This structure makes the strategy well-suited for investors allocating 5–20% of their portfolios to private credit as part of a diversified private investment mix.
Within private credit broadly, diversification can take many forms: direct lending, GP/LP solutions, asset-backed credit, and opportunistic credit. Our Fund sits at the intersection of direct lending and asset-backed credit—offering the reliability of secured, first-lien debt with the collateral strength of real estate and the stability of consumer-driven kennel demand. This positions Canine Capital not just as a niche play, but as a ballast within a diversified private credit allocation, complementing higher-risk strategies while delivering consistent income.
Is private credit worth the risk?
The key question for investors is whether they have been adequately compensated for the incremental risk and historical illiquidity of private credit—and whether that compensation is sustainable moving forward. On the first point, the evidence is clear: private credit has consistently outperformed high-yield debt over the long term, delivering better risk-adjusted returns with lower volatility.
Looking ahead, returns across the broader private credit market are likely to normalize. The 2022 spike in short-term rates briefly pushed performance as high as 12%, but history suggests a sustainable range of 8–10% is more realistic as base rates gradually come down and competition increases.
This is precisely why the Canine Capital Private Credit Debt Fund stands out. Rather than competing in crowded corporate lending markets, our Fund targets a $20 billion financing gap in the boarding-kennel industry, where banks remain absent and capital is scarce. By providing secured promissory notes backed by real estate and cash-positive operations, the Fund positions investors to capture yields that remain above traditional private credit ranges—with the added security of first-lien collateral and industry-specific underwriting.
A strategic, diversified approach to private credit.
The private credit landscape, while evolving, continues to offer investors significant potential for durable, long-term returns. Success in the space requires focus and selectivity: diversification across strategies is important, but manager expertise and disciplined underwriting ultimately determine outcomes. As the economy faces elevated risks of slower growth and tighter credit conditions, investors must align with funds that specialize in sectors where demand is steady and collateral is strong.
The Canine Capital Private Credit Debt Fund embodies this selective approach. By concentrating on the $20 billion boarding-kennel industry, we combine the resilience of consumer-driven demand with the security of real estate-backed lending. This specialization allows us to avoid the overcrowded corners of private credit while providing investors with fixed, predictable returns and downside protection. In our view, a targeted, disciplined strategy like Canine Capital positions investors not just to navigate complexity, but to achieve sustainable success in private credit.
We can help.
If you’re interested in exploring how private credit in the $20 billion boarding-kennel industry can strengthen your portfolio, our Canine Capital Fund team is here to help. We’ll walk you through the opportunity, explain how our secured, real estate-backed strategy works, and show you how it may fit into your long-term financial plan.