4
Structural considerations
Do you have a fund structure preference for direct lending exposure?
Given that most private credit strategies are high cash-generating in nature, the market has been able to innovate in new fund structures to take advantage of this versus historical blind-pool, draw-down vehicles.
When asked whether investors have preference for a certain type of fund structure, when allocating in private credit, just over half (53%) expressed preference for a traditional, closed-end draw down fund vehicle. Furthermore, 27% prefer evergreen structures with some form of liquidity, with a further 20% opting for customized SMAs. At the lower end, only 9% expressed a preference for private BDCs.
Are you seeing new funds launched with higher hurdle rates given the higher rate environment?
The higher total return environment has also prompted a desire from investors for performance fee hurdle rates to adjust upwards. When asked whether investors are seeing funds launch with higher return hurdles for performance fees or carried interest, 40% of respondents responded affirmatively.
Source: CL Research
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