medium · Private Credit fund-structures-returns-economics
A fund uses a 'Subscription Line' of credit to finance its investments.
How does this typically impact the fund's reported IRR to its Limited Partners?
- It has no material impact because IRR is only calculated on the gross value of the portfolio.
- It reduces the depth of the J-curve but does not change the ultimate MOIC realized by fund investors.
- It decreases the IRR because the interest expense on the credit line is a persistent drag on net investor returns.
- It tends to inflate the IRR by delaying capital calls and shortening the measured investment period.
Sign up free to see the explanation and track your rank →
More Private Credit fund-structures-returns-economics practice
- What is the Dividend Coverage ratio?
- If management achieves a 6.0x Money Multiple (MOIC) on their personal investment, while th
- A BDC (Business Development Company) is required to distribu… — What is the primary benefi
- What is the fund's TVPI (Total Value to Paid-In) multiple?
- An investor is reviewing a fund's performance and sees a DPI… — What does this suggest abo
- What is its current Debt-to-Equity (Leverage) ratio?
- If the fund's net TVPI is only 1.15×, what is the most likely explanation?
- A GP is managing a fund with a 'European' (whole-fund) water… — How much carried interest