Liquidity, Designed on Purpose

 

Ask anyone paying attention to private credit headlines over the past six months what the biggest concern has been, and liquidity mismatch comes up fast. On a recent webinar introducing Garrington Private Credit to the US market, our Executive Vice President and Chief Risk Officer, Erica Axani, was asked directly about it.

The mismatch behind the headlines

“What are the headlines?” Erica said. “Large private credit platforms, quarterly liquidity, and multi-year illiquid loans. That’s not a good combination.” The structure itself creates the risk: a fund promising investors access to their capital every quarter, while the loans underneath won’t mature for years. When redemption requests rise, the fund has nothing short-term to point to.

“At Garrington, what we have is monthly liquidity with 90-day notice combined with shorter-term duration loans,” Erica said. “The average duration of our portfolio today is approximately seven months,” which sits within Garrington’s target range of six to nine months.

Matched to the collateral

That short average duration starts with the lending itself, not the liquidity terms. Factoring and traditional asset-based lending revolving facilities are naturally short-cycle businesses: receivables get collected, inventory turns over, and both happen on a timeline of weeks or months, not years. Garrington’s loan book, made up of factoring, asset-based lending, and shorter-duration term loans, most of which are open facilities rather than long-dated commitments, inherits that same short cycle. The factoring book alone collects on approximately a 50-day cycle.

As Erica put it, “The portfolio that we have today turns very quickly. It’s more matched to our liquidity, and we think that’s a good combination to have.” The liquidity terms were set to match how quickly this kind of collateral naturally repays. The loan book generates cash on a timeline that lines up with what investors are entitled to redeem, without depending on new capital or asset sales to bridge a gap.

What redemption looks like in practice

Our Managing Director, Toreigh Stuart, laid out what that structure means for an investor directly. “We offer reasonable liquidity with notice,” he said. “Senior-secured asset base lending is a great asset class where risk-adjusted returns are superior to most other investment strategies. One of the give-ups of the asset class is liquidity. However, contrary to many other private credit strategies, our portfolio is built with some of the most liquid types of private loans in the market today.”

In a pooled loan book, liquidity depends on how quickly the underlying loans repay. Garrington’s short average duration is what allows monthly access with 90 days’ notice to be offered in the first place, and in practice, redemptions are met on that schedule the majority of the time. As Toreigh put it, “Because we have so much liquidity, 80 to 90% of the time we let investors redeem on a monthly basis with less notice than 90 days. However, we ask investors to think of this as a medium-term investment commitment with a wind-down projection within 9–15 months (if ever needed).”

The underlying principle applies to any fund offering periodic liquidity: the terms are only as reliable as the loan book behind them. A shorter, faster-turning book supports shorter, faster liquidity terms. Garrington’s structure is built to keep that relationship direct.

A boutique responsibility: showing investors where their money goes

Staying a boutique means Garrington can offer a level of visibility that’s harder to provide at scale. Investors aren’t asked to take a return figure on faith. Garrington opens up the portfolio itself, the actual loans that make up the fund, so investors can see directly what their capital is deployed against. Understanding where your money goes matters, and Garrington doesn’t lose sight of that responsibility.

If you’d like to discuss, please feel free to contact us: investors@garringtonprivatecredit.com

This post is for informational and discussion purposes only and is not intended to be, nor shall it be construed as, advice or any recommendation or an offer, or the solicitation of any offer, to buy or sell an interest in any security, by Garrington Group Inc. and Coral Cove Capital Ltd. or each of their respective affiliates (collectively “Garrington”), Garrington Private Credit Fund Ltd. or any private fund advised or sponsored by Garrington, Coral Cove Capital Ltd., or any of their respective affiliates (each a “Fund”). Any such offer or solicitation may be made only by delivery of the respective Fund confidential offering documents to qualified or accredited eligible investors. Prospective investors should rely solely on the delivery or review of such confidential offering documents in making any investment decision.

Any opinions, assumptions, assessments, statements or the like (“Statements”) regarding future events or which are forward-looking, including regarding portfolio characteristics, constitute only subjective views, are based upon expectations or beliefs, should not be relied on, are subject to change due to a variety of factors, including fluctuating market conditions, and involve inherent risks and uncertainties, both general and specific, many of which cannot be predicted or quantified and are beyond the control of Garrington. Past performance is not indicative of future results.