Curious to hear your take on fund investments and confirm I'm thinking about this the right way.
My private credit fund is on the cusp of closing its next fund. Terms for employee fund investment are no fees/carry and an external leverage facility (First Republic) that will provide up to 65% LTV at an interest rate of roughly prime less a couple bps.
My fund's hurdle is ~6.5% and the leverage facility interest rate would be ~3%. This seems like a no-brainer with an IRR in the low teens for a fixed income alternative, excluding the concentration risk (minimum investment size would make this about 1/4 to 1/3 of my portfolio.)
Rough math here is 2:1 leverage at an interest rate about half the fund return, for a return of roughly double the actual fund return.
Am I overthinking this? Seems like very competitive terms, right?
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