CityWire Due Diligence Report: Private Credit - March 2025

ARTICLE SUMMARY - Four Critical Considerations for Private Credit Investments:

1. Track Record and Experience: Investors should prioritize private credit managers with proven expertise across multiple economic cycles, particularly those who have navigated through challenging periods like the 2007-2008 financial crisis. Look for teams with consistent performance, low default rates, and a long-tenured investment approach that demonstrates resilience during market volatility.

2. Robust Risk Management and Due Diligence: Successful private credit investing requires a comprehensive risk management framework, including strong covenant protections, conservative loan-to-value ratios, and thorough underwriting standards. Investors should conduct extensive reference checks, evaluate manager alignment, and ensure the investment strategy includes downside protection mechanisms.

3. Sophisticated Origination and Expertise: Top-tier private credit managers distinguish themselves through deep origination platforms, extensive networks, and cross-functional expertise. This includes having sector specialists, transaction attorneys, risk analysts, and portfolio managers who can effectively source unique opportunities, monitor portfolio risks, and engage actively with borrowers.

4. Flexible Portfolio Construction: The most effective private credit strategies demonstrate flexibility in portfolio construction, with the ability to adjust to changing economic conditions. Key considerations include maintaining dry powder for opportunistic investments, ensuring proper diversification, and having the capacity to navigate increasingly competitive and complex debt markets.