Tranche is a versatile term meaning a defined portion of a larger whole. In lending, the three main uses are:
1. **Drawdown tranche**, a stage of advance on a staged facility. A $5m development loan with five $1m tranches advances the first tranche at settlement and subsequent tranches against milestone completion.
2. **Structured facility tranche**, a layer in a structured warehouse or securitisation. A warehouse facility might have a senior tranche, mezzanine tranche, and equity tranche, each priced at a different rate reflecting the risk position.
3. **Investor tranche**, a class of units or notes in a fund or trust. Some private credit funds offer multiple unit classes (e.g. a senior unit paying a fixed yield, an equity unit absorbing first-loss risk in exchange for upside), each class is a tranche.
In the Archer Wealth Investment Fund, all units are pari passu (no tranching), every investor sits in the same economic position. Tranched structures are common in institutional private credit warehouses but unusual in retail-oriented funds.