When deciding whether or not to invest into alternative investments, there are five focus points that institutional and sophisticated allocators consistently return to.
Match the redemption profile of the fund to your actual liquidity needs. The illiquidity premium is real, but it is also unforgiving when redemption windows close at the wrong moment.
Performance in a benign environment tells you almost nothing. Look for evidence of how the manager handled a real workout, a real default, and a real period of mark-to-market pressure.
Don’t stop at the headline yield. Understand what is actually in the portfolio — by borrower type, by security, by geography.
Understand the all-in cost: management fee, performance fee, expense recovery, and the gap between gross and net portfolio yield.
Responsible Entity quality, custodian arrangements, administrator quality and auditor reputation matter — especially when something goes wrong.
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