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Alternative Investment Intelligence · In development

Private Credit Real Yield

The distance between a stated coupon and the yield a taxable investor actually receives, after fees, after credit losses across a cycle, and after tax on income that is almost entirely ordinary.

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Status

This instrument is being built

Private credit is the asset class where the headline number is furthest from the received number, and where the comparison usually drawn — against public fixed income, on stated yields — is the wrong one.

The written analysis is complete and readable now in Alternative Investment Intelligence. This page sets out what the instrument will compute.

Specification

Stated yield to real yield

Deduction 1
Fees
Management fee on invested or committed capital, performance fee above a hurdle, and any feeder or fund-of-fund layer.
Deduction 2
Credit losses
Expected default rate and recovery assumption applied across a full cycle rather than a benign vintage — supplied by the reader, with the sensitivity shown.
Deduction 3
Structural drag
Undrawn capital earning a cash rate, fund-level leverage cost, and the difference between committed and deployed capital in the return calculation.
Deduction 4
Tax
Applied at the reader's own ordinary-income rate, because private credit return is predominantly interest. Where the vehicle features original issue discount or payment-in-kind, recognition can precede cash receipt.
Output
Real yield
The after-loss, after-fee, after-tax yield, alongside the stated yield, so the gap is a figure rather than an impression.
Output
Fair comparison
The same treatment applied to a public fixed-income alternative, so the two are compared on the basis the investor actually experiences.
Boundaries

What it will not do

It will not assess any specific manager's credit underwriting, predict a default cycle, or state tax treatment for a jurisdiction. Loss and rate assumptions are the reader's, and the instrument's job is to apply them consistently and show what they imply.

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