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According to a definition from Brookings, private credit is generally defined as lending by non-bank financial institutions — including private equity firms and alternative asset managers — most often to small and mid-sized businesses, who are often highly leveraged and generally cannot borrow in corporate bond markets.

Churchill Asset Management senior investment strategist Alona Gornick joins Wealth! to break down how private credit works and how investors can best utilize it for their portfolios.

Gornick starts with direct private credit, which is "not only enormous, it's also highly diverse."

"There's so much inside of private credit to understand. And that's really important for the average investor who's thinking about is private credit a one size fits all solution. And that's not the case with private credit. You have a number of investment strategies. Direct lending is typically thought of as the largest component of private credit."

Study up on private credit and how it works with Yahoo Finance explainers on the asset class:

Private credit: Breaking down how the asset class works

Chart of the day: What is private credit?

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Nicholas Jacobino