Preqin Academy - PD Investment Strategies

Private Debt

Private Debt Funds

Direct Lending

Distressed Debt

Mezzanine

Special Situations

Venture Debt

Non-bank lenders extending loans to small and medium enterprises (SMEs). • A direct lending fund issues loans directly to companies. • The type of debt issued, such as senior or subordinated, depends on the fund’s strategy.

Buying the debt of companies that are in bankruptcy or likely to enter bankruptcy. • A distressed debt fund is similar to direct lending, but only targets distressed opportunities. • The debt issued tends to be senior, and therefore high in the capital structure, due to the substantial threat of liquidation. • Debt may be bought at a significant discount, with the goal being that the value of the company improves after the debt investment.

A hybrid of equity and debt finance. • A mezzanine fund only issues mezzanine debt to companies. • Debt issued has conversion rights to equity with embedded equity options if the borrower defaults.

A private pool of institutional investor capital that invests in several private debt funds. • A private debt fund of funds invests in a variety of third-party debt funds depending on the fund strategy. • Provides greater portfolio diversification for institutional investors.

A loan based on a ‘special situation,’ referring to something other than underlying company fundamentals. • A special situations fund focuses on companies whose value may be impacted by a certain event, including company spin-offs, mergers & acquisitions, or tender offers. • This can include both debt and equity investments.

A loan provided to a start-up or early-stage company. • Provides loans to act as growth capital for equipment financing, or as accounts receivable finance.