Private credit has emerged as an attractive asset class for investors seeking enhanced returns, but recent data reveals a critical challenge: manager selection risk.
Notably, the 54 constituents in the VettaFi Private Credit Index showed dramatic performance dispersion in 2025. Returns ranged from positive 20% to negative 30% – a staggering 50-percentage-point spread.
Key Takeaways
- Performance dispersion in private credit reached 50 percentage points in 2025, highlighting the extreme risks associated with individual manager selection.
- Traditional private credit investing requires a difficult two-step process: deciding on the asset allocation and then vetting specific managers.
- The Simplify Private Credit Strategy ETF (PCR) offers an index-based solution that mitigates selection risk by providing broad, diversified exposure to the asset class.
The Manager Selection Dilemma
This wide dispersion creates a significant dilemma for investors. “If you were invested in the manager who was up 20%, you’re probably quite pleased with your exposure. On the other hand, if you were invested in the manager who had a 30% negative return, you’re probably not so happy,” Christopher Getter, portfolio manager at Simplify Asset Management, said during a recent webcast.
Traditionally, private credit investing requires a two-step process. First, making an asset allocation decision to invest in private credit. Second, selecting which manager to invest with. This manager selection decision carries substantial risk, as the 2025 data clearly demonstrates.
For advisors, the stakes are particularly high. The consequences of poor manager selection can significantly impact client relationships and portfolio performance.
An Index-Based Solution to Private Credit Risk
The Simplify Private Credit Strategy ETF (PCR) addresses this challenge by taking a different approach. Rather than requiring investors to navigate the manager selection minefield, PCR "invests in the entire index, so you will get a much more diversified exposure over the very large breadth of issuers that are active in the private credit space,” Getter said.
This approach consolidates the traditional two-step process into a single decision. “If you just want that to be one decision, which is the asset allocation decision into private credit, PCR is a very expedient way to get that,” Getter explained. By providing broad index exposure, PCR mitigates manager selection risk while maintaining access to the private credit asset class.
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vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for PCR, for which it receives an index licensing fee. However, PCR is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of PCR.
