Families alongside the balance sheet: co-investment in private credit

Families held US$74 million alongside the firm at 31 December 2024, in nine of the thirteen facilities the Commercial Finance division carried at that date. The firm held US$112 million in those same nine. The arrangement is deliberately plain. A family takes a participation in a facility the firm has underwritten, at the same price, on the same date, under the same documents. There is no separate vehicle, no separate credit paper and no separate committee.

Two rules make it work. The firm holds not less than 25 per cent of every facility it offers to families, for the life of that facility, and it may not reduce the holding without offering the same reduction to participants. Allocation is settled under the Order Handling and Allocation policy before the facility is signed, pro rata against expressed appetite, and recorded. An attractive facility is not offered to the largest relationship first. The register shows the order in which it was offered, and that order is alphabetical.

Fees are the second place these arrangements usually fail. The firm charges no management fee and no carried interest on a participation. It charges an administration fee of 35 basis points a year on the participated amount, which covers documentation, the borrowing base extract and the quarterly report. Arrangement fees paid by the borrower are shared with participants in proportion. A client who pays twice for one credit decision has learned something about the institution rather than about the credit.

Reporting is the same paper the credit committee reads. Participants receive the quarterly borrowing base extract, the covenant compliance certificate and a one-page commentary from the facility manager. Where a covenant is breached or waived, participants are told within five business days rather than in the next report. That happened twice in 2024, both times on a feed conversion covenant in an aquaculture facility, and both were cured inside a quarter. A participant who learns of a waiver from a quarterly report has been managed rather than informed.

Participation is open to professional and accredited investors only, at a minimum of US$2 million and a typical size of US$3 million to US$8 million. The firm sets a concentration limit for each relationship: no more than 15 per cent of the assets it advises on for that family in private credit, and no more than 5 per cent in any single facility. It declines participations funded by borrowing against the family's other assets. A participation bought with borrowed money converts a credit decision into a liquidity decision.

Every participation decision is taken by a person and recorded by name, under the seventh principle of the Ethical Technology Charter. No model allocates. Families take these positions because the firm has read the borrower's inspection reports and site surveys and the family cannot. The firm offers them because a facility it would fund alone is easier to fund with company, and because a lender that keeps a quarter of every loan has already told participants what it thinks of the credit.

Published 2025-03-25 by the Private Wealth & UHNW division. Research is prepared for eligible counterparties and does not constitute advice.