GoldMinr: As Treasuries Lose Appeal, Will Private Credit and Gold Fill the Portfolio Gap?

The investment landscape is constantly shifting. As we navigate the complexities of 2025, a growing number of investors are re-evaluating traditional asset allocations. With US Treasuries showing signs of diminished appeal, the question arises: can private credit and gold step in to fill the portfolio gap? In this blog, we’ll delve into the factors driving this potential shift and explore the unique benefits and risks associated with each asset class.

The Waning Allure of Treasuries

US Treasury bonds have long been considered a cornerstone of investment portfolios, prized for their safety and stability. However, several factors are eroding their appeal:

De-Dollarization: Major foreign investors, including China and Japan, are reducing their holdings of US Treasuries, fueling a trend of de-dollarization. As of early 2025, foreign holdings of US debt have declined from 35% in 2015 to roughly 23%.
Rising US Debt: With the national debt exceeding $35 trillion, concerns about devaluation are pushing capital into tangible assets.
Erosion of Safe-Haven Status: US Treasuries appear to have lost some of their appeal as the world’s primary safe-haven asset in times of financial market volatility.
Low Yields: While treasury yields have fluctuated, the yield on the 10-year note ended September 19, 2025, at 4.14%. After accounting for inflation, real interest rates may be low or even negative, reducing the attractiveness of treasuries.

Private Credit: An Alternative Source of Yield

As Treasuries lose their luster, private credit is emerging as an attractive alternative for investors seeking higher yields and diversification. Private credit refers to loans or other forms of debt financing provided by non-bank lenders to private companies.

Market Growth: Private credit has experienced remarkable growth, expanding nearly tenfold to reach $1.5 trillion in 2024. Projections estimate the market could reach $3.5 trillion by 2028.
Higher Yields: Private credit has offered higher yields than many traditional fixed-income assets. Capital is “climbing the yield curve,” moving from safe Treasuries (4–5%) to riskier Private Credit (10–16%).
Floating Interest Rates: Private credit typically offers floating interest rates, which benefit investors when the Federal Reserve raises interest rates.
Diversification: There is a growing appetite among both private credit managers and their investors to diversify portfolios beyond direct lending.

However, it’s crucial to acknowledge the risks associated with private credit:

Liquidity Risk: Since the underlying loans in a private credit fund aren’t publicly traded, there is no market for them.
Credit Risk: The most important risk is the creditworthiness of the companies being lent to. If a company cannot make interest payments or goes bankrupt, missed interest payments or loss of principal can occur.
Complexity and Opaque Information: Private credit is characterized by opaque information and bespoke structures, making it more expensive and less liquid than rated bonds.
Governance Concerns: Concerns over governance are mounting, with some experts warning that lenders are taking on riskier loans and “marking their own homework” due to a lack of external valuation.

Gold: A Timeless Store of Value

Gold has long been considered a safe-haven asset and a hedge against economic uncertainty. In times of market turmoil, investors often flock to gold as a store of value, driving up its price.

Inflation Hedge: Gold tends to hold its value for longer than many other types of assets, acting as a hedge against inflation. Historically, as inflation has risen, gold prices have also increased and protected wealth and spending power from erosion.
Portfolio Diversification: Gold has a low correlation with stocks and bonds, providing a diversification benefit to investment portfolios.
Geopolitical Hedge: In times of geopolitical tension or economic uncertainty, gold often benefits from a flight to safety.
Central Bank Demand: Central banks worldwide have been aggressively accumulating gold reserves, signaling a strategic shift in global monetary policy.

However, gold also has its drawbacks:

No Yield: Gold generates no yield or interest, so holding it involves an opportunity cost.
Volatility: Gold’s price can be volatile and does not always move in tandem with inflation in the short term.
Storage Costs: Investors should be mindful of the additional costs of investing in physical gold, including storage, insurance, and transaction fees.

Finding the Right Balance

As Treasuries lose some of their appeal, both private credit and gold offer potential solutions for investors seeking higher yields and diversification. However, it’s crucial to understand the risks associated with each asset class and to carefully consider your own investment goals and risk tolerance.

Private Credit: Consider private credit as a way to enhance portfolio yield, but be mindful of liquidity and credit risks. Diversification across different types of private credit and experienced managers is essential.
Gold: Allocate a portion of your portfolio to gold as a hedge against inflation and economic uncertainty. Financial advisors typically recommend allocating 5-15% of an investment portfolio to gold for inflation protection.

Ultimately, the decision of whether to invest in private credit or gold depends on your individual circumstances. Consulting with a financial advisor can help you determine the right asset allocation strategy for your portfolio.