Percent is excited to expand the range of investment opportunities available to retail accredited and institutional investors by offering Limited Partnership (LP) interests in managed private credit funds. These passive investments allow investors to diversify across a broader spectrum of private credit and tailor their portfolio to meet their specific needs.
What are managed private credit funds and Limited Partnership (LP) investments?
Similar to a hedge fund or mutual fund, a General Partner (GP) sets up a managed private credit fund. In this case, the fund is composed of private credit investments, and investors have the chance to participate as Limited Partners (LPs). The GP is responsible for setting the fund’s strategy and uses the capital provided by LPs to invest in assets that meet that strategy. For LPs, this is a passive investment that generates income, with specific returns established in the fund parameters.
In keeping with our philosophy of improving accessibility to private credit investing, Percent is making it easier for investors to find and participate in LP investments. Typically, these investments have had high minimum investment thresholds and were difficult to find. The Percent marketplace improves discoverability and accessibility.
How do LP investments differ from individual transactions?
Most Percent investors manage their investments directly, picking and choosing individual transactions based on the borrower profile, APY, income, duration, and other factors. An LP investment can complement this strategy by providing more diversified exposure to a pool of private credit investments selected to meet the strategy set forth by the GP. It’s not an either-or investment choice: investors can participate in individual deals and also be an LP in a managed fund. As an LP in a managed fund, the investor has less to do as the GP manages the investment portfolio.
How do LP investments work on Percent?
The process of investing as an LP is similar to other investments on Percent. We will market the transaction to investors with terms and conditions clearly specified. The GP’s underlying documentation will be available for investor due diligence. Once you’ve decided to participate, funding takes place using your established account and your LP investment is shown as part of your Percent private credit portfolio. Returns/income are posted to your account in accordance with the managed fund’s schedule and the deal details set forth in the deal page. The main difference is that, for LP investments, the returns to investors will not be determined by an APY or by interest payments, but by the income generated by the underlying investments.
Who are the General Partners?
GPs are credit professionals that create an investment strategy, source deals, and manage the portfolio of deals alongside the capital they are able to raise from LPs. GPs typically have extensive experience in underwriting the types of deals that fit their investment strategy and are looking to continue building their track record in their current fund. In many cases, the GPs are the same underwriters who are bringing individual deals to Percent investors.
For investors, particularly those who have invested in one or more deals from an underwriter on Percent before, this is a chance to gain additional exposure to that underwriter’s strategy and broaden their exposure to private credit.
How can investors participate?
Investors can find these opportunities on the Percent Investor platform, just as you find individual transactions or Percent Blended Notes today. Every deal will have its own deal page where investors can find the details. We’ll also highlight LP investment opportunities in our weekly newsletter and will often host webinars to introduce them.
How does Percent support investors?
Investors buy the funds directly from the GP. Percent acts as Private Placement Agent (through Percent Securities LLC, a registered broker-dealer and a member of FINRA and SIPC) and handles syndication-related administration for the fund. That means that information about your LP funds will be included as part of your Percent portfolio, and cash flows and returns will be managed through the platform. Although LP investment opportunities are available through other channels, Percent offers investors a one-stop, consolidated experience that lets you manage all your private credit investments in one place.
What about risk?
Every investment is subject to risk and LP investing is no different. Percent will provide investors with access to the GP’s strategy and documentation, just as we do for every deal, so that investors can conduct their own due diligence and assess risk.
Percent will complete standard levels of due diligence, including Know Your Customer, on every GP setting up a managed fund on our Platform.
Where do LP investments fit in the continuum of private credit deals available on Percent?
Percent offers a variety of private credit investing options to investors, from direct investment in individual transactions, to bespoke blended notes and Percent blended notes, and now LP managed private credit funds. In general, we view LP managed private credit funds as requiring less investor involvement once the decision to participate has been made.
Here’s a quick overview of how these opportunities stack up, in terms of core characteristics:
We are excited to offer this new investment structure to Percent investors, expanding your access to the universe of private credit opportunities while making it easier to monitor all your private credit investments in one place. Contact our Investor Relations team if you’d like to learn more.