Credit Funds: How PE Funds Can Address and Minimize Conflict When Expanding Into Credit

Although larger sponsors have been running PE funds simultaneously alongside credit funds for quite some time, over the last few years there has been a steady increase in the number of private equity firms expanding their product offering to include credit funds. A key consideration for a PE firm deciding to enter the credit space is how to address and minimize potential conflicts of interest that arise when one sponsor has funds investing in both equity and debt. In the fourth installment of our credit funds podcast series, our attorneys take up this topic in their discussion on how to implement walls, develop appropriate policies and procedures, and navigate disclosure in key conflict scenarios, such as handling material nonpublic information (MNPI), investing in different levels of a portfolio company’s capital structure and allocating investment opportunities.