20 May 2020

Alternative Credit - Conflicts of Interest

Addresses credit specific conflicts of interest including investments in different parts of the capital structure.

In Alternative Credit funds there are specific conflicts of interest that can arise due to the nature of the strategy. 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. This memo also includes questions that investors may wish to ask during due diligence processes.

This memo addresses the following:

  • What the SBAI Alternative Investment 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.