hard · Private Credit fund-structures-returns-economics

Ignoring fees and defaults, what is the levered annual cash return on the LP equity, and what is the position's net interest-rate sensitivity if both the loan coupon and the facility rate are floating off the same index?

1. About 10.33% on equity, with roughly neutral net rate sensitivity because the asset and the facility both reprice with the index
2. About 15.0% on equity, levering the full asset yield, with positive rate sensitivity since assets exceed borrowing
3. About 10.33% on equity, but with negative rate sensitivity because facility cost is assumed to reprice faster than asset income
4. About 9.0% on equity, with claimed neutral sensitivity since the 2.0% spread between yield and cost is treated as fully offsetting the position

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