The capital markets have been quite tumultuous the past few years. We saw record low rates & excessive printing flood the market with cash. This allowed real estate investors & companies alike to tap into cheap financing.
That all changed with the Fed's attempt to cool off the resulting inflation which brought asset prices to an all time high.
Almost overnight, much of our capital markets dried up. As rates increased & lending institutions turned off the spigot.
This resulted in an opportunity for private funds to fill in the gap, where CMBS & large banks have pulled back Credit Funds have come in.
What is Private Credit
A private credit fund (also known as a debt fund) is a pool of money whose purpose is to provide financing for real estate projects & businesses.
These applicants might be looking for a bridge loan, mezzanine debt, or fixed rate financing much like a traditional mortgage.
The result, especially during higher rate environments, is a high yield & relatively low risk investment.
Accredited investors looking for a long term, fixed income investment should look no further.
How it Operates
A private credit fund is similar to other private equity vehicles where investors invest in a fund that is deployed to a variety of real estate assets as loans. A major benefit of a credit fund is the flexible nature of these investments.
Credit funds can provide interest only, floating, or fixed rate debt to operators with a more tailor made product. These operators start paying back principal & interest which is distributed to investors.
Most investments will be paid back through a refinancing of the property & investment capital can be redeployed to more investments.
Some funds will have a predetermined sunset where all capital & profit is distributed back to investors & while other open-ended funds allow for investors to invest & redeem their shares as needed.
“Private Credit is going Investment Grade.”- Carlyle Group
Vintage Credit Fund
The Vintage Credit Fund allows investors to access some of the largest alternative investment managers in the world. With over 100 billion in AUM, solo investors are typically unable to invest with these operators.
- 8%+ yield
- Paid monthly
- Senior secured loans
- Stable, all-weather strategy
- Great vintage year - golden era of credit investing