The private credit industry has evolved dramatically over the past decade. What began with relatively straightforward direct lending has since expanded into a dizzying array of funding arrangements and assets that each have their own unique traits and considerations. That proliferation of sub-strategies has spurred the development of numerous types of fund structures and variations in distribution mechanics designed to address the diverse needs of all applicable parties involved in the fund process. Against that backdrop, sponsors need to design fund waterfall structures to suit the characteristics of the underlying portfolio construction. Yield-oriented strategies emphasizing current income (e.g., senior direct lending) favor current income-driven structures that align GP incentives with income generation, while providing LPs with regular distributions. Conversely, opportunistic and capital appreciation-oriented strategies (e.g., distressed debt) typically employ the more conventional carry structures in traditional European or modified American-style waterfalls. This first article in a two-part guest series by Willkie Farr partners Samuel Weber and John M. Knapke describes the core asset types, features, complications and return profiles of various private credit asset classes, including infrastructure debt and dislocation funds. The second article will outline several types of waterfall structures – and relevant variations within each – that are used to align with the risk, reward and return profiles of each asset class. See “Evolution of the Private Credit Industry and Ongoing Challenges” (Feb. 19, 2026).