A floating rate resets at set intervals, often quarterly, to a short-term benchmark plus an agreed spread. Lenders' income and borrowers' interest bills move with rates.
What the video says
In private credit, a loan's interest rate can change every quarter. It's called a floating rate. It's a benchmark rate, plus a fixed add-on called the spread. Say the spread is five points. With the benchmark at four percent, plus five, the borrower pays nine. At the next reset, the benchmark is three. Now it pays eight. The spread stays. The benchmark moves. Much private credit is lent this way. So why do investors care? Lenders' income moves with rates, and so does the strain on borrowers. Rates move. The loan moves with them.
In the glossary: Floating rate and spread
A simple example with round numbers, not advice. Terms vary by fund.
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