MSCI Inc. (NYSE: MSCI) has launched a Private Credit Factor Model, an analytical tool designed to help institutional investors integrate private credit into systematic, factor-based risk frameworks, thereby enhancing transparency and providing a consistent view of risk across public and private markets.
The launch addresses a critical challenge faced by investors who are increasingly allocating capital to the private credit market but often lack sufficient data and insights to assess the risks of these private investments within their total portfolios. The rapid growth of private credit over the last decade, driven by the search for yield and structural shifts in capital markets, has outpaced the development of adequate management tools. Institutional investors, including pension funds, are under pressure from stakeholders to provide greater clarity on these assets.
The new model is powered by MSCI’s analytics and cross-asset modeling capabilities, drawing on the company’s Private Assets Universe data, which offers extensive cashflow and valuation data in the private markets industry. Luke Flemmer, Head of Private Assets at MSCI, stated that “Private credit requires enhanced analytical tools and insights as it plays an increasingly important role in diversified investment portfolios.” He added that MSCI’s model aims to support smarter decision-making by bringing transparency and consistency to private credit risk, allowing investors to better understand its contribution to overall portfolio risk and resilience.
Available through MSCI’s Analytics platform, the Private Credit Factor Model allows risk teams to decompose risk across various private credit strategies, such as corporate lending and asset-backed debt. This is achieved using region- and strategy-specific factors that capture market, structural, and idiosyncratic risk drivers. The tool also enables users to assess how private credit exposures respond to macroeconomic shocks and shifting credit conditions through scenario analysis and stress testing, and to understand their impact on total portfolio risk.
Furthermore, the model addresses data limitations common in private markets by employing MSCI’s proprietary estimation and mapping techniques to account for illiquidity, lagged valuations, and sparse pricing. It supports the integration of private credit into total portfolio risk reporting, aiding investment decisions, board-level oversight, risk budgeting, and strategic asset allocation.
The Private Credit Factor Model is built on data from over 1,500 private capital funds and utilizes the MSCI Private Capital Solutions taxonomy for detailed classification across region, strategy, and capital structure. This data foundation offers insights into the structural and behavioral characteristics of private credit, helping to uncover both systemic and idiosyncratic risks, thereby enhancing portfolio construction and stress testing to public market standards.
This new model expands MSCI’s suite of private credit analytics, which are designed to assist investors in measuring, managing, and benchmarking asset class risk. It complements the MSCI | Moody’s Private Credit Risk Assessment tool, which focuses on default and loss probabilities, providing a view on private credit’s long-term volatility and correlation with other asset classes. Jorge Mina, Head of Analytics at MSCI, commented that “MSCI is continuing to expand the boundaries of risk modeling across asset classes.” He further noted that the platform helps risk teams keep pace with portfolio complexity and deliver strategic insight, with the private credit factor model underscoring the commitment to evolving client needs and fostering a holistic understanding of risk in a multi-asset environment. The Private Credit Factor Model is the latest enhancement to MSCI’s multi-asset class analytics suite, accessible through MSCI Barra One.
About MSCI: MSCI Inc. (NYSE: MSCI) provides research-based data, analytics, and indexes for global investors. The company serves asset managers and owners, private-market sponsors and investors, hedge funds, wealth managers, banks, insurers, and corporates.
