FintexCap - Your Premier Alternative Credit Manager (2024)

FAQs

What is an alternative credit fund? ›

Alternative Credit Income Fund invests across credit markets, strategies, and managers to seek current income, capital preservation, and low to. moderate correlation to the broader equity markets.

Alternative Investment Funds (AIFs) provide an option to invest in different asset classes − such as venture capital, private credit, and hedge funds − primarily for Limited Partners (LPs) that are typically large pension funds, endowments, and family offices.

Private credit (also known as direct lending) is generally defined as lending by non-bank financial institutions—including private equity firms and alternative asset managers—most often to small and mid-sized businesses, who are often highly leveraged and generally cannot borrow in corporate bond markets.

The advantages versus many other types of debt investments include: 1. Greater Protection From Rising Interest Rates: Loans have shorter duration (i.e., less sensitivity to interest rate changes) than fixed-rate debt.

Alternative investments also include non-traditional approaches to investing within special vehicles, such as private equity funds and hedge funds. These funds may give the manager flexibility to use derivatives and leverage, to make investments in illiquid assets, and to take short positions.

The pros of alternative lending include: flexible eligibility requirements, easy application processes, no usage restrictions and fast funding. The cons of alternative lending include: higher costs of borrowing, shorter loan terms and additional research is often required.

The allure of private credit is tempered by inherent risks, including credit, liquidity and market uncertainties. Loans in this sector are typically extended to entities beyond the purview of public debt markets, inherently carrying higher credit risks.

Alternative credit, also referred to as private credit or private debt, has emerged as an area of significant interest for investors in recent time, offering attractive returns and distinct advantages compared to liquid credit markets across an array of strategy offerings.

The typical minimum credit score to qualify for a personal loan is 560 to 660, according to lenders surveyed by NerdWallet. Some lenders may require a higher score.

Is private credit the same as debt? ›

You will sometimes see private debt and private credit used interchangeably. However, an important distinction is that private credit is just one type of private debt. At PitchBook, we define private credit, or direct lending, as directly originated loans to corporate borrowers that are not broadly syndicated.

Private credit is an umbrella term referring to a loan extended to a privately held company. Private credit provides capital to companies that may not otherwise be able to access the traditional loan market. Repayment of the loan is often secured by a pledge of the borrower's assets.

Distressed debt refers to the securities of a government or company that has either defaulted, is under bankruptcy protection, or is in financial distress and moving toward the aforementioned situations in the near future.

Direct lending losses match high yield and leveraged loans

This shows annual credit losses (default rate – recovery rate) for the high yield, broadly syndicated loan, and direct lending markets since 2005. Credit losses in 2023 were 0.9% for direct lending, 1.4% for high yield and 1.3% for leveraged loans.

Liquid credit provides an income-driven return stream that offers a spread premium above government bonds, and also creates diversification benefits relative to equities.

Alternative credit includes information like rent payment history, gig economy income, utility bill payments, childcare payments, and more. Alternative credit scoring can increase loan approval rates, as credit reports fail to paint the full picture of a borrower's creditworthiness.

The alternative investment fund is a unique investment vehicle that is beyond traditional investments like fixed deposits, equity, mutual funds, stocks, etc. It is quite popular among mature investors, who are willing to earn higher returns by taking higher risks.

Risks of Alternative Investments

Alternative investments are more complex than traditional investment vehicles. They often have higher fees associated with them. As with any investment, the potential for a higher return means higher risk.