By Credit desk
Quick answer
Ask a fund manager whether their weighted-average LVR has drifted up to grow the book, and what share of the portfolio sits in soft-exit territory, before comparing yields.
What we look for on a file
The same three questions, every file. What is the asset, and how quickly could it be sold to a market participant other than the borrower? What is the exit, and is it in train without our intervention? Who is the sponsor, and what would they lose personally if the file went sideways?
What it means for the LP
The implication for an investor allocating to Australian private credit right now is to look past the headline yield in the fund factsheet. Ask the fund manager which of the three questions above they answer hard, on every file. Ask whether the weighted-average LVR by security type sits inside the envelope they advertise, or whether it has drifted up to make the book grow. Ask what proportion of the portfolio currently sits in soft-exit territory.