medium · Private Credit fund-structures-returns-economics
An LP is conducting due diligence on a direct lending fund. The fund reports a 1.85x TVPI but a 0.15x DPI for a 2019 vintage fund.
What is the most significant risk highlighted by these metrics in Year 5 of the fund's life?
- Excessive management fee drag
- High loss ratios on early deals
- Valuation risk on unrealized gains
- Insufficient dry powder for follow-ons
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