Are you investing in a private credit fund who doesn’t have an external trustee?

Does having an external trustee of a private credit fund matter?

The short answer is absolutely yes, they significantly enhance investor transparency for several key reasons -

⚫ Independent Monitoring - An external trustee provides unbiased oversight of the fund’s operations, ensuring that all lending, repayment, and fund management activities are conducted transparently and align with investor expectations.

⚫ Enhanced Accountability - External trustees are legally obligated to uphold fiduciary responsibilities, ensuring that all fund activities prioritise investor interests.

⚫ Regulatory Compliance - External trustees ensure that the fund complies with complex regulatory requirements, such as lending limits, borrower disclosures, and investor protections.

⚫ Risk Disclosure - External trustees facilitate clear and accurate communication of credit risks, repayment schedules, and portfolio performance to investors.

⚫ Reliable Communication - Investors receive clear and accurate information without the risk of overstatements or omissions by fund managers.

⚫ Independent Governance - The presence of an external trustee signals a commitment to transparency and ethical management, building credibility with current and potential investors.

⚫ Risk Mitigation - External trustees often oversee audits and compliance reviews, ensuring that the fund’s practices remain transparent and aligned with investor agreements.