Private credit AUM sits around $1.8 trillion today, with Preqin projecting $2.5 trillion by 2028. As PE firms launch credit strategies and credit-focused managers scale, fund administrators are handling an increasingly complex asset class.
Private credit and private equity have different administration needs.
The Core Difference: Income vs. Exit Events
Private equity funds distribute proceeds after capital events, a sale, IPO, or recapitalization. Between events, the fund accounting is relatively quiet.
Private credit funds generate income continuously. Interest payments, fees, and principal repayments flow throughout the fund's life. Every payment is a transaction that must be recorded, reconciled, and reported.
NAV calculations happen more frequently. Investor reporting includes income allocations. The general ledger sees constant activity rather than periodic spikes.
Interest Accrual Complexity
Calculating interest on private loans is rarely straightforward. Credit funds commonly hold:
Floating rate loans tied to SOFR or other benchmarks. When the benchmark moves, interest accruals must be recalculated across the entire portfolio. This is ongoing.
PIK (payment-in-kind) interest where accrued interest is added to principal rather than paid in cash. This compounds the loan balance over time, complicating future interest calculations and NAV.
Delayed draws and revolvers where commitment amounts differ from funded amounts, and availability changes over time.
A formula error in a PIK interest calculation compounds over the life of the loan. What starts as a small discrepancy can materially misstate NAV by maturity.
Covenant Monitoring
Credit funds track payments and compliance. Loan agreements include financial covenants (leverage ratios, interest coverage) and reporting covenants (delivery of financials, compliance certificates).
A missed covenant test can trigger a technical default. Fund administrators need systems that surface upcoming test dates and flag potential breaches early. This requires tracking covenant schedules, threshold calculations, and borrower-provided financials across the portfolio.
Waterfall Differences
Private credit waterfalls share the same basic structure as PE, return of capital, preferred return, catch-up, carried interest, but the economics differ:
Component | Private Equity (Typical) | Private Credit (Typical) |
|---|---|---|
Preferred Return | 8% | 6-7% |
Carried Interest | 20% | 15-20% |
Hurdle Structure | Fixed | Sometimes floating (tied to loan rates) |
Some credit funds use split waterfalls, one for current income (interest and fees) and another for capital proceeds (principal repayment, refinancing, dispositions). The income waterfall may pay carried interest before return of capital, while the capital waterfall follows traditional sequencing.
Tracking two parallel distribution streams with different economics adds administrative complexity.
Management Fee Structures
PE funds typically charge management fees on committed capital during the investment period, then switch to invested capital afterward.
Credit funds vary. Fees may be based on:
• Cost basis of investments held
• Net asset value
• Invested capital including fund-level leverage
The inclusion of leverage in the fee base is notable, credit funds commonly use fund-level borrowing (secured by assets) to enhance returns, and this leverage may or may not factor into management fee calculations depending on the LPA.
Subsequent Closing Complexity
When new investors join a PE fund at a subsequent closing, the economics are relatively clean, they typically participate in prior investments and may receive a share of unrealized gains.
Credit funds face a harder question: does a subsequent closing investor receive income that accrued before their admission? If yes, earlier investors effectively subsidize later ones. If no, the administrator must track and allocate income by investor vintage, which gets complicated when combined with reinvestment.
Capital Recycling
Credit funds have greater flexibility to reinvest both principal repayments and profits during the investment period. A loan that repays early can be recycled into a new origination.
This is operationally intensive. The administrator must track reinvestment eligibility, maintain accurate cost basis records, and ensure recycling stays within LPA limits, all while continuing to calculate and distribute current income.
What Administrators Actually Need
Administering a private credit fund requires different infrastructure than PE:
Loan servicing systems that track payment schedules, rate resets, covenant dates, and borrower reporting, not just capital account balances.
Dynamic interest calculation that recalculates accruals when benchmarks change, handles PIK compounding, and manages multiple tranches per borrower.
More frequent NAV production to support income distributions, management fee calculations, and investor reporting.
Covenant monitoring workflows that surface upcoming test dates and flag potential breaches before they become defaults.
Many administrators built their platforms for PE-style funds and are retrofitting for credit. Others are purpose-built for credit but lack depth in traditional PE structures.
The Operational Reality
Private credit administration isn't necessarily harder than PE, but it is different. The continuous income stream, loan-level tracking requirements, and covenant monitoring create a different operational cadence.