How to Evaluate the Quality of a Private Debt Fund?

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MARKET INSIGHTS

March 4th, 2024

If you’re comparing private debt funds, you will have quickly discovered that not all funds are created equal. But, how can you truly tell a quality private debt fund from an average one?

Being able to distinguish between private debt companies and choose one that aligns with your investment goals and values is a huge undertaking. Quality matters, and in this article, we’ll outline how you can evaluate the quality of a private debt fund to find one that suits your needs. In doing so, you’ll be able to make an informed investment decision.

1. Clear investment strategy philosophy alignment.

One of the first things to look for when evaluating a private debt fund is the alignment between the fund’s investment strategy and your objectives. At Bowery, our primary focus is ensuring the security of your investment — which is every investor’s focus as well.

There’s significant synergy between Bowery and our investors because we stand behind every investment decision we make. And we’re not just saying that — we invest our own money. By financially backing deals, we are partnering with our investors. We prioritise the safety of our investments.

Additionally, we provide investors with the flexibility to choose their investments through contributory deals rather than pooled funds. This allows for greater visibility and customisation to meet individual needs, with the ability to enjoy diversification manually if desired. Your personal investment strategy and the fund’s strategy absolutely must line up.

2. Due diligence & sponsorship quality.

Another differentiator for us is the strength and quality of our borrowers, including their liquidity and cash flow, which adds an extra layer of security to your investments.

But don’t just take our word for it. Scrutinising the due diligence process of Fund Managers is crucial. We encourage interested investors to utilise their internal investment committees and/or third parties to verify the quality and reliability of our investments. You’ll get the full picture of what happens behind the scenes here, adding peace of mind when it comes to our processes and confidence when it comes to our investment decisions.

Black and white exit signage on roadside.

3. A clear & secure exit strategy.

Be wary of funds that don’t have defined exit strategies. Choose a fund that takes extra time to provide clarity regarding exit strategies, like we do. In the event that a borrower cannot repay, we ensure there is guaranteed collateral in the form of properties that Bowery can seize and liquidate to repay investors, safeguarding your interests. A clear exit strategy is paramount.

4. Understanding returns in the context of risk.

It’s essential to benchmark returns against industry standards. Be cautious of funds promising extraordinarily high returns, as it may indicate a lacking or risky exit strategy. Remember, no investment is without risks (no matter what some funds may promise). Quality private debt funds — like Bowery — prioritise sustainable and realistic returns while managing risks effectively.

5. Operational transparency & positive investor relations.

Ethical fund operations and conflict of interest policies are good indicators of a quality private debt fund (or a bad one). How the fund communicates with investors is also worth noting, which is why it’s important to get real feedback from existing investors, if you can.

Since our founding, operational integrity has been a core part of what makes us, us. We make measured decisions when it comes to investments, as well as how we conduct ourselves in the everyday. We pride ourselves on our ongoing relationships with clients and emphasise transparent communication across all aspects of our operations. For example, we provide frequent updates, reports and quarterly reviews, our Investment Directors are readily accessible to all investors, and we have robust risk management protocols in place.

6. Diverse experience & leadership.

The quality of a private debt fund is often reflected in the experience, wisdom, and leadership of its team. There’s nothing wrong with a small team or a young fund, but experience does matter — and you don’t want your investment to be a fund’s learning curve.

Our Fund Managers have expertise in the industry, as well as adjacent industries including banking, corporate finance, economics, and law. And, they’re supported by a skilled and stable management team from diverse professional and corporate backgrounds.

These diverse experiences lead to a better understanding of emerging markets and trends, which have proven valuable for capital allocation. Armed with the benefit of different perspectives, we have unique insights and approaches to problem-solving, which are powerful in the world of finance where creative strategies can lead to competitive advantages.

A person holding a medal.

7. A favourable, proven track record.

Any private debt fund evaluation should include a check of the fund’s past performance. We’re proud of ours and have nothing to hide, and we encourage investors to leverage investor feedback and assess our market reputation. We also welcome scrutiny through third-party ratings and independent reviews to ensure transparency and accountability.

Determine Bowery’s quality for yourself.

Whether you’re in the midst of comparing private debt funds or about to start, you’re probably looking for a quality fund that values people and aligns with your investment goals. We invite you to explore Bowery Capital. Talk to us to discover the benefits of an investor-focused capital fund where relationships are paramount.

Let’s do this.

You didn’t come here by chance.
You came here because you wanted to invest in your future. So, why wait?

Whether it was to invest or borrow, let’s take this first step together.

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