Hidden Leverage in Private Credit Funds: How to Assess What’s Hiding Under the Hood

November 30, 2023

Many investors may not realize that the use of leverage among private credit funds varies widely. Some funds are completely unlevered, while others may employ meaningful leverage to achieve their target returns. What also varies is the type of leverage a fund may use.

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Standard or explicit leverage is easy to understand and detect, since it’s visible on the fund’s balance sheet. Hidden leverage is less known to many private credit investors. It is opaque and can take multiple forms making it difficult to detect and quantify.

Our latest AFA Perspective presents

  • Why private credit funds employ leverage
  • The risk and benefit of leverage
  • Two types of hidden leverage
  • Ways to understand the return sources from your private credit investments

Click here to download the white paper.

Disclosures

Alternative Fund Advisors, LLC (“AFA”) does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does AFA recommend that the information presented serve as the basis of any investment decision.

AFA is the investment adviser of the AFA Private Credit Fund, a continuously offered closed-end interval fund. An investment in the Fund involves risk. The Fund’s investment in private credit securities is speculative and involves a high degree of risk, including the risk associated with leverage. Read the prospectus carefully before you invest. Investors should carefully consider the Fund’s investment objectives, risks, charges and expenses before investing. This information is contained in the Fund Prospectus and a copy may be obtained by calling 800-452-6804 or by clicking here.

 

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