Private Debt Fund

In addition to these 4 categories, there is asset-based finance (loans backed by identifiable assets: receivables, inventory, equipment) and private real estate debt (loans secured by real estate assets), with returns of 7% to 10%. Bridge lending completes the offering with short-term loans (2 to 3 years) backed by assets, yielding 9% to 12% annually.

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How Does a Private Debt Fund Work?

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The lifecycle unfolds in four phases. Phase 1, Capital Raising: The General Partner (GP) raises capital from LPs over 12 to 24 months. Phase 2, Deployment: Capital is deployed over 2 to 4 years by originating loans. Phase 3, Management and Coupons: For 5 to 7 years, the fund collects interest and distributes it quarterly or semi-annually. Phase 4, Repayment: Upon loan maturity, capital is repaid to LPs and the fund is liquidated. Total duration of a typical fund: 7 to 10 years.

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What Returns to Expect from a Private Debt Fund?

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Returns net of management fees and carried interest. Average annual loss rate below 1% for European senior secured direct lending (Deloitte 2024). A well-managed fund delivers a net IRR of 8% to 12% and a multiple of 1.4x to 1.7x over a full cycle.

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Private Debt Risks to Know

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Credit Risk: If a borrower defaults, the fund incurs a loss. Historical default rates for European direct lending are between 1% and 3% per year, higher during recessions.

Illiquidity Risk: capital locked up for the fund's duration (2 to 10 years). Early exit via the secondary market with a discount. Illiquidity is structural and means private debt should not be part of assets that need to remain readily available.

Valuation Risk: unlisted loans valued at fair value, potential discrepancies with actual sale value.

Interest Rate and Currency Risk: compression of returns in case of interest rate drops, currency exposure for funds in USD, AUD, or other currencies.

Manager Selection Risk: the quality of origination, rigor of underwriting, and ability to intervene in case of difficulty make all the difference to final performance.

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How to Invest in a Private Debt Fund?

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Four main channels. FPCI (Professional Private Equity Fund): reserved for informed investors, the most used vehicle for institutional strategies, regulated by the AMF (French financial markets authority). FCPR (Venture Capital Fund): accessible to the general public, minimum 50% in unlisted assets. Unit-linked life insurance: since 2023, some contracts include private debt. Pooling platforms: SPV (Special Purpose Vehicle) structures that group individual subscriptions to meet institutional ticket sizes.

Typical institutional tickets range from 100,000 to 500,000 euros. Pooling through SPVs significantly lowers this barrier, sometimes to as little as 1,000 euros.

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What Role for Private Debt in a Wealth Allocation?

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For an investor with a diversified financial portfolio, an allocation to private debt between 5% and 15% of the portfolio is generally considered appropriate. This allocation helps increase the expected return of the overall portfolio without significantly degrading volatility, thanks to its decorrelation with listed markets.

Private debt is a more natural substitute for the bond allocation than for the equity allocation. An investor traditionally positioned 60/40 (60% equities, 40% bonds) can consider shifting 10 to 15 percentage points from their bond allocation to private debt to gain yield, while maintaining similar credit risk exposure but with less accounting volatility.

Private debt is a long-term investment. Since capital is locked up for 2 to 10 years depending on the strategy, it should only represent a portion of assets not intended for short-term use. The 8-year rule (do not invest money you might need within 8 years in unlisted assets) remains a useful guideline.

Finally, diversification within the private debt allocation itself is recommended: combining multiple strategies (direct lending, unitranche, asset-based, bridge, special situations) and vintages spreads risks and smooths returns over time.

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Choosing the Right Private Debt Fund: Essential Criteria

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Not all private debt funds are created equal. Six concrete criteria help distinguish good managers from the rest.

Manager's track record: how many vintages have been launched, what was the performance of previous funds (net IRR, multiple, default rate, realized losses). The best managers have navigated multiple market cycles, including periods of stress.

Origination quality: a manager with a direct network (private equity funds, CFOs, M&A advisors) accesses a broader and more qualified pipeline. Proprietary origination (deals sourced exclusively) is a strong signal.

Underwriting methodology: depth of due diligence, dedicated credit analysis team, formal credit committee. Institutional managers have structured and documented processes.

Lender protections: negotiated covenants, collateral taken, rank in the capital structure. A fund lending in senior secured with strict covenants is better protected than a subordinated fund without specific collateral.

Portfolio diversification: 30 to 50 minimum positions to smooth out individual default risk. Sectoral and geographical diversification is also an important criterion.

Alignment of interests: carried interest mechanism, hurdle rate (generally 6 to 8%), GP's personal investment in their own fund (skin in the game).

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Investing in a private debt fund with Fundora

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Fundora provides individual investors access to private debt through a demanding institutional architecture. Each selected strategy is structured as an FPCI with an SPV mechanism that pools subscriptions and allows investment at the original institutional ticket size. Discretionary management is entrusted to Kyoseil Asset Management, a portfolio management company approved by the AMF under number GP-99040. This offering complements Fundora's other unlisted components: private equity, venture capital, and growth equity.

Rigorous selection. Each private debt strategy distributed by Fundora undergoes thorough due diligence: manager's track record, quality of deal origination, credit underwriting methodology, strength of collateral and covenants, alignment of interests, and clarity of fee structure. Only strategies meeting these institutional criteria are offered on the platform.

A diversity of risk-return profiles. Fundora's offering covers the entire spectrum of private debt: depending on market opportunities and the quality of available strategies, the offering may include senior secured direct lending, unitranche, asset-based finance, private real estate debt, short-term bridge lending, or more aggressive strategies (mezzanine, special situations). Investors can diversify across multiple strategies within the same allocation.

A seamless user experience. Registration is online, the entry ticket is lowered through mutualization via SPV, and distributions are paid directly into the investor's account according to the underlying fund's frequency (quarterly or semi-annually). Reported returns are net of management fees and carried interest. Capital is returned at loan maturity, in accordance with each strategy's schedule.

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