Private Debt vs Listed Bonds: Understanding the Core Differences
16 April 2025 · Sachin Gadekar
Unpacking the Pros, Cons & Investment Fit of Private Debt vs Public Bonds
What Is Private Debt?
At TapBonds, we’re on a mission to make bond investing simple, transparent, and rewarding. As part of our financial education series, today we dive deep into a rising debate in the world of fixed-income investing: Private Debt vs Listed Bonds.
Both are avenues to lend capital and earn returns—but they operate very differently in terms of risk, access, liquidity, and return potential. In this article, we’ll break down what sets them apart, when to choose one over the other, and why the line between them is more relevant than ever in 2025.
Private debt refers to non-publicly traded debt instruments, meaning the lending is done privately between borrowers and investors, often without being listed on a public exchange.
Key Characteristics:
Typically involves direct lending to companies by institutional investors, private lenders, or debt funds.
Often includes senior secured loans, mezzanine financing, or unitranche structures.
Common in mid-market companies that may not have access to traditional capital markets.
Pros of Private Debt:
Higher yields due to illiquidity premium.
Customizable structures tailored to borrower needs.
Less correlation with public market volatility.
Cons:
Low liquidity – investments are often locked in.
Higher credit risk due to lesser regulatory oversight.
Limited transparency compared to listed securities.
What Are Listed Bonds?
Listed bonds are publicly traded fixed-income instruments issued by governments or corporations and listed on exchanges like NSE or BSE.
Key Characteristics:
Highly regulated, with transparent issuance and trading
Includes corporate bonds, sovereign bonds, and municipal bonds.
Investors can buy or sell easily in the secondary market.
Pros of Listed Bonds:
Liquidity: Easy entry and exit via exchanges.
Transparency: Regular ratings, filings, and price discovery.
Lower perceived risk in investment-grade bonds.
Cons:
Generally lower yields due to lower risk.
Exposed to interest rate fluctuations and market volatility.
Crowded space: Limited customization or negotiation
📊 Side-by-Side Comparison
| Feature | Private Debt | Listed Bonds |
|---|---|---|
| Access | Restricted to institutional or accredited investors | Available to retail and institutional investors |
| Liquidity | Illiquid (long lock-in) | High liquidity via secondary markets |
| Transparency | Private terms, limited disclosure | Public filings and ratings |
| Returns | Higher yields due to risk and illiquidity | Moderate to low fixed interest returns |
| Risk | Higher credit and default risk | Lower risk, especially for sovereign or AAA-rated bonds |
When Should You Choose Private Debt?
Private debt might suit you if:
You’re seeking higher yields and can lock in capital for the long term.
You understand the credit profile of mid-sized borrowers.
You want to diversify away from the volatility of public markets.
When Should You Choose Listed Bonds?
Listed bonds are ideal for:
Investors who value liquidity and safety.
Those building a retirement or conservative income portfolio.
Retail investors wanting regulated and transparent debt exposure.
🌐 2025 Trends in Debt Investing
🔼 Rise of Private Credit Funds:
With tightening regulations on banks, private credit funds are stepping in to fill financing gaps—especially in real estate, infrastructure, and small business lending.
⚖️ Tighter Monetary Conditions:
While repo rates have seen moderate adjustments in 2025, investors are demanding better yield-risk tradeoffs, making private debt more attractive for seasoned players.
🧾 Listed Bonds Becoming More Retail-Friendly:
Thanks to RBI initiatives and platforms like TapBonds.com, listed bond investing is becoming as seamless as equity trading for everyday investors.
💡 The Bottom Line
Both private debt and listed bonds have unique roles in a diversified portfolio. If you're a retail investor just starting out, listed bonds offer safety and flexibility. But if you're an HNI or institution with a higher risk appetite, private debt can offer better yields and uncorrelated returns.
At TapBonds.com, we simplify access to both public and private fixed-income opportunities. Whether you want to buy listed corporate bonds, explore NCDs, or understand market trends, we’ve got you covered.
🙋♂️ Frequently Asked Questions (FAQs)
1. Is private debt riskier than listed bonds?
Yes. Private debt typically involves lending to smaller companies without public scrutiny or ratings, increasing default risk.
2. Can retail investors access private debt?
Usually no. Private debt is often limited to institutional or accredited investors due to the high-risk and illiquid nature of the product.
3. Are listed bonds safer investments?
Generally, yes. Especially if you invest in sovereign or AAA-rated corporate bonds, which are subject to regulatory disclosures and ratings.
4. Which one gives better returns—private debt or listed bonds?
Private debt often offers higher yields, but listed bonds offer better liquidity and lower risk.
5. Where can I buy listed bonds in India?
Platforms like TapBonds.com offer access to listed bonds, NCDs, and sovereign securities in an easy and transparent way.