20 May 2020

Alternative Credit - Conflicts of Interest

In Alternative Credit funds, there are specific conflicts of interest that can arise due to the nature of the strategy. This memo discusses these conflicts in the context of the Alternative Investment Standards and provides guidance on conflicts of interest specific to Alternative Credit.

The SBAI Alternative Investment Standards provide standards and guidance on the mitigation and management of conflicts of interest but further guidance may be needed on good practices.

In this memo we discuss:

  • What the SBAI Standards say about conflicts of interest in areas such as fees, handling conflicts between different investors and PA dealing.
  • Guidance on specific conflicts of interest in Alternative Credit such as affiliated CLO businesses, affiliated loan servicing businesses, loan origination fees, private equity financing and more.
  • A framework of questions investors may wish to use when assessing these risks during the due diligence process.