A sovereign fund approached us to evaluate its first-ever private debt allocation. The questions were foundational: how much, funded from where, and managed by whom.
We began with the funding source — analysing whether the allocation should come from credit, cash or equity buckets — and modelled the pacing required to reach a steady-state programme without disrupting the existing portfolio.
Manager selection focused on underwriting discipline: covenant standards, workout capability and loss history through stressed periods, rather than headline yields.
The resulting shortlist balanced senior direct lending with a smaller allocation to specialty finance, giving the fund contractual income with differentiated risk drivers.
The programme is now in its second year of deployment, on plan and producing the income profile the board approved.
Key takeaways
- First allocations start with funding-source analysis, not manager lists
- Commitment pacing determines when the programme reaches steady state
- Underwriting quality and workout capability drive real outcomes
- A diversified strategy mix balances income against risk concentration