Private credit has grown into a nearly $2 trillion asset class. Institutional investors, retail allocators, and regulators are all watching as the sector comes under pressure. But according to Dr. Elham Saeidinezhad, an adjunct professor of economics at CCNY and co-founder of Covenant Lab Analytics, there is a basic gap in how these deals get valued: nobody is pricing the contracts themselves.
Saeidinezhad, presenting alongside Columbia University student and Covenant Lab co-founder Uri Ravid at the Future Alpha 2026 conference, laid out a framework for evaluating these investments; Private credit contracts contain dozens of covenants, clauses that govern cash flows, protect lenders, and define what happens when things go wrong. These clauses have real economic value. But right now, that value sits outside the pricing models.
“Unless you price the exposure embedded in the contract itself, you cannot really make a fair assessment of what you own,” Saeidinezhad said. “The alpha already exists. You just have to know how to find it.”
Five Families, One Hundred Covenants
Covenant Lab catalogs roughly 100 possible covenants that can appear in a private credit contract, then sorts them into five families based on their dominant function.
- Maintenance covenants are leverage ratios and coverage tests that monitor a borrower’s financial health on an ongoing basis.
- Cash flow covenants are clauses like excess cash flow sweeps that redirect money back to the lender when the borrower’s revenue exceeds a threshold.
- Governance covenants cover distributions and operational control.
- Exit covenants determine how easily a lender can sell or transfer their position, which matters more as the secondary market for private credit grows.
- Enforcement covenants are the mechanisms a lender can invoke when a borrower breaches terms.
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