How credit funds are funded
Your lender has investors, a deployment window and a return target. All three end up in your term sheet.
Borrowers treat a lender as a fixed institution with a rate card. It is closer to a company on its own timetable, with its own investors to answer to, and both of those show up in what it can offer you.
The structure
A closed-end fund with a ten-year life, capital committed by pension funds, insurers, funds of funds and development finance institutions. It draws that capital as it lends, deploys over roughly the first three to five years, and returns capital as facilities amortise. Many funds also borrow at the fund level to improve returns, which means your lender has a lender.
The fund promises its investors a net return, typically low-to-mid teens. Working backwards through fees, fund-level leverage and expected losses gives the gross yield it needs on the portfolio — which is where the pricing you are quoted comes from. It is arithmetic, not appetite.
Why the timing matters to you
A fund early in its deployment window needs to build a portfolio and will compete for good credits. A fund near the end of it is managing what it has and will not. A fund raising its next vehicle wants marks and realisations it can show, which makes it conservative on new risk and generous on anything that looks certain.
Continue learning
That is the end of the library for now. Back to all guides.