Private Debt Funds
Fund of Funds
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.
Click the fund strategies for break downs