Private debt funds are investment portfolios that primarily consist of loans provided to small to mid-size companies or for real estate acquisitions. These funds have become increasingly popular due to the tight and regulated credit markets, which make it difficult for quality companies to secure financing for their projects and expansion. As a result, these companies turn to the private debt markets for the necessary funding.

The sponsors of private debt funds conduct their own thorough due diligence on the companies seeking financing. They carefully select companies that meet their specific requirements and are able to provide the necessary collateral or covenants to qualify for the loan. With the limited availability of credit, private debt funds have the advantage of choosing the best options and benefiting from favorable interest rates, ultimately generating returns for the private debt investors.

It’s important to note that private debt funds are not liquid exchange-traded securities and come with their own set of risks. However, they operate on the same principle as other fixed income instruments. The private debt funds offered through Cornerstone aim to provide attractive cash on cash returns, while also offering significant protection against loan defaults or downside risk. However, these funds may have limited potential for appreciation.