Davis Polk partners Michael Hong, Chris Healey and Luke Eldridge were featured in Private Debt Investor’s Annual Review discussing how to maximize credit fundraising in a competitive environment.

Noting key trends in private credit, Michael said, “The first is the high level of competition we are seeing when it comes to fundraising, even among brand-name credit firms. …The second theme we are observing is the growing variety of ways in which emerging firms are attempting to access market opportunities. …[Third,] given our firm’s bank regulatory resume, we are also getting calls from banks trying to get (back) into the private credit business.”

Discussing some common problems they are asked to solve, Luke explained, “Historically, tax structures (like ‘season and sell’, treaty funds or lev­ered blockers) would be chosen at the outset of the fundraising process. More recently, we are seeing some sponsors build in an ability to pivot to one or more of these mid-fundraising, if nec­essary, to the most efficient structure based on the actual breakdown of the investor base through multiple closings.”

As private credit funds explore a wider variety of product types, Chris noted, “Managers used to be terrified of the 40 Act and its restrictions – now we see start-ups launching BDCs either as a first step or at the same time as their first-time private funds. There is a growing trend in the market that most sponsors are going to want to have at least one access point for retail investors.”

“Maximising credit fundraising agility in a competitive environment,” Private Debt Investor (March 3, 2025)

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