Private Debt Funds - Return levers and legal documents / investing process
Hey guys,
I am currently recruiting in Europe for an Analyst position at Private Debt funds, coming from IB and PE. Did not get an offer at a BB and therefore now try to start on the buy side.
What are the main return levers for a Private Credit fund / which ones are the most important?
1) Interest income ( E + spread)
2) Arrangement fee -> others as well?
3) OID + later principal repayment / refinancing on par
4) Leverage on fund level
Any other levers?
Could someone explain the different legal documents required and the typical order in the investing process?
I have seen commitment letters and term sheets, but I think there are more?
Thank you very much!
808_Banker, have you checked out these or run a search:
More suggestions...
You're welcome.
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You're forgetting the arguably most important return driver-- loss rates. Spreads are fairly market driven and will be confined to a range within a given strategy (for example, most senior debt funds will lend within the same band of rates, say 5-8%, notwithstanding idiosyncratic differences). But loss rates are what make or break funds. Two funds with the same weighted average interest rates will generate a much different IRR on 0% losses vs 10% losses.
Ah sure. Pretty obvious one, but was not on my list.
Could you maybe add something to my second question regarding the investment process, especially the (order of) legal docs, as well? Thank you!
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