The Garrington Private Credit Fund (the “Fund”) returned 0.90% (Class I Units) in July. Annualized returns since inception (January 2021) are 10.26%.
Fund Insights
The Fund’s underlying portfolio (the “Portfolio”) (as at July 31, 2024) has exposure to approximately 96 invoice factoring, ABL, equipment finance, real estate, lender finance, specialty finance or similar type loans. Presently, the geographic weighting of the Portfolio is approximately 72% to the US and 28% to Canada. Of these positions, the largest portfolio weights are 28% to commercial SME finance, 24% to invoice factoring and 25% to lender finance and 19% to ABL.
Notes from Account Management
Evidencing Best Practices
Having Credit Policies that speak to underwriting processes, Investment Committee approval requirements, and portfolio operational management is essential. However, the rubber really hits the road when asked to provide evidence that such guidelines are actually they are followed.
A true measure of integrity is not following the rules while you are being scrutinized but following the rules even when no one is looking.
The good news is that our underwriting and portfolio operations teams hold each other accountable for following our documented policies. Our Investment Committees are called upon to ensure that the underwriting and portfolio operations teams operate with integrity. Further, we are, in fact, scrutinized at least five times per year to ensure that we can evidence compliance.
Our bank partners conduct on-site in-depth exams a total of three times per year; in addition, we have two levels of scrutiny by financial auditors when they conduct their annual financial audit processes in the first instance by those auditing the lender entities books and records, and then again by the fund’s auditors.
The reviews are in-depth, broad-based, conducted by groups of professionals in each instance, and can be exhausting.
On the other hand, the results of the audits are gratifying as they are independent evidence that we operate with integrity and do what we say we will do.
This topic is at the top of my mind as we just completed one such audit.
Sharing the breadth and scope of this typical audit is critical to appreciating the scrutiny level our teams operate under.
We had two senior examiners on-site at our offices for a week, with an analyst back at the examiner’s offices.
The initial audit request list is comprised of 12 sections, with approximately 50 questions/requests for detailed information.
Our team spends time gathering the data and compiling a data room with the materials provided to make it easy for the examiners to review and see that all requested materials have been provided. This information will be delivered before the examiner arrives at our office.
While on-site, the audit team begins to dig into the materials presented, which appropriately generates more questions. Our team meets with the audit team while on site to review and clarify the materials presented and provide additional materials.
The scope of detail includes a review of operational management reporting tools and materials, a review of meeting minutes, validating loan ledger to bank activity (for both advances and collections), reviewing deal approval memos and security documentation, including any amendments to deals, ensuring that all items conform to our written policies.
Examiners even go so far as to interrogate our cybersecurity, data backup, and disaster recovery policies, along with evidence of integrity testing and the results.
Preparing for and working through these audits is a team effort.
These audits also provide an opportunity for our team to shine. Sometimes, areas like cyber security can be taken for granted, but a lot of hard work goes into ensuring our data and systems are properly protected.
The Garrington team works hard every day to deliver with excellence. While the audits can be grueling, they are also rewarding, and we can and do take pride in the results.
April Fund Commentary