Private Credit vs Public Bonds: Which One Fits Your Income Strategy?
For decades, bonds have been the default choice for income-focused investors. Municipal bonds, Treasuries, and corporate bonds have long promised steady payments and relatively low risk. But in recent years, private credit—also known as private debt—has emerged as a serious alternative.
If you’re building an income strategy, you may be wondering: Private credit vs public bonds—which makes more sense for my portfolio?
At LBC Capital Income Fund, LLC, we work with investors who want stable monthly income, capital protection, and reduced market correlation. In this guide, we’ll break down the key differences between private credit and public bonds, the pros and cons of each, and how alternative fixed income strategies can help you achieve your income goals.
What Is Private Credit?
Private credit refers to loans made to businesses or individuals that are not issued or traded on public markets. In our case, that means short-term, first-lien, real estate-backed loans issued to vetted borrowers.
Examples of private credit investments include:
- Real estate debt funds
- Direct lending to businesses
- Mezzanine debt (higher risk)
- Asset-based lending
Private credit investors earn returns primarily from interest payments—just like bonds—but the loans are negotiated privately, not bought or sold on an exchange.
What Are Public Bonds?
Public bonds are debt securities issued by governments, municipalities, or corporations and sold to investors in public markets. They include:
- U.S. Treasury bonds (low yield, high safety)
- Municipal bonds (tax-advantaged income)
- Corporate bonds (higher yield, higher risk)
Bondholders receive fixed interest payments (coupons) and the return of principal at maturity.
Private Credit vs Public Bonds: Key Differences
Here’s how the two compare across the most important factors for income investors:
| Factor | Private Credit | Public Bonds |
|---|---|---|
| Yield | Typically higher (LBC Capital Income Fund, LLC targets 8–10% annualized) | Varies: Treasuries ~4–5%, corporates ~5–6% |
| Volatility | Low—valued on underlying loan performance, not daily market pricing | Moderate—prices fluctuate with interest rates and market sentiment |
| Liquidity | Moderate—redemption windows (e.g., every 6–12 months) | High—can be sold on secondary markets quickly |
| Correlation | Low correlation to equities and public markets | Higher correlation to interest rate cycles |
| Security | Often asset-backed (real estate collateral) | Generally unsecured or backed by issuer’s credit |
| Access | Available through private funds for accredited investors | Accessible to all investors via brokerages |
| Income Frequency | Often monthly | Semi-annual or quarterly |
Where Private Credit Wins
1. Higher Yield Potential
In today’s market, investment-grade corporate bonds may yield 5–6%. Treasuries offer even less. Private credit strategies—especially real estate debt—can deliver 8–10% annualized returns while maintaining strong collateral protections.
Why? Private loans often command higher rates because they serve borrowers who need speed, flexibility, or customized terms that banks can’t provide.
2. Reduced Market Volatility
Public bond prices swing with interest rate changes. Even if you hold to maturity, your portfolio value can fluctuate dramatically in the interim.
Private credit, on the other hand, is not marked to market daily. Loan values are based on performance—are borrowers paying as agreed?—not on market sentiment. That means less portfolio whiplash.
3. Real Asset Security
Many private credit strategies, including LBC Capital Income Fund, LLC’s, use first-lien, real estate-backed loans. If a borrower defaults, we can take control of the property and recover capital.
Most public bonds are unsecured—you’re relying solely on the issuer’s ability to pay.
4. Diversification Benefits
Because private credit returns are less correlated to stocks and bonds, adding it to your portfolio can reduce overall volatility and smooth out income.
Where Public Bonds Still Have the Edge
We believe in transparency, so let’s be clear: public bonds do have advantages.
- Liquidity – You can sell most public bonds within days. Private credit typically offers redemption windows (e.g., quarterly or semi-annual).
- Accessibility – Anyone can buy bonds through a brokerage account; private credit funds often require accredited investor status.
- Regulatory Oversight – Public bond markets are heavily regulated; private credit relies on fund-level governance and due diligence.
Which One Fits Your Income Strategy?
The answer depends on your priorities.
If you want:
- Maximum liquidity
- Public market accessibility
- Lower yield but high safety (Treasuries, municipal bonds)
→ Public bonds may be your fit.
If you want:
- Higher income potential
- Lower volatility
- Asset-backed protection
- Diversification from market swings
→ Private credit could be the smarter move.
The Case for Combining Both
Many of our investors use both public bonds and private credit in their fixed income strategy:
- Bonds for quick liquidity and short-term needs
- Private credit for higher yields, diversification, and stable monthly income
This blended approach can create a balanced income portfolio that still delivers growth without taking on stock market risk.
Why LBC Capital Income Fund, LLC’s Private Credit Strategy Stands Out
At LBC Capital Income Fund, LLC, we focus on short-term, first-position, real estate-backed loans—a conservative segment of the private credit market that emphasizes capital preservation.
Here’s what sets us apart:
- 8–10% annualized target returns paid monthly
- First-lien loans only—your capital is first in line for recovery
- Low loan-to-value ratios (typically under 65%) for an equity cushion
- Conservative underwriting with strict borrower vetting
- Monthly income you can spend or reinvest
- Diversified portfolio across borrowers and property types
For income-focused investors frustrated by low bond yields or market swings, this can be a compelling alternative.
Don’t Limit Yourself to Just One Tool
Bonds have their place. But the fixed income landscape has evolved, and alternative fixed income strategies like private credit can offer higher yields, more stability, and valuable diversification.
If you’re building an income strategy for retirement, wealth preservation, or generational planning, it’s worth asking:
Am I getting the best balance of yield, risk, and stability from my current portfolio?
If the answer is “I’m not sure,” we’d be happy to walk you through how private credit—especially real estate-backed lending—could fit alongside your existing investments.
Interested in exploring LBC Capital Income Fund, LLC’s private credit strategy?
We’ll show you how it works, run numbers based on your goals, and outline exactly how it can complement your bond portfolio. Book your consultation.
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