Historically, hedge funds and private equity funds occupied two distinct realms within the alternative investment funds industry; hedge funds typically being structured as open-ended funds pursuing generally liquid and public investment strategies, and private equity funds typically being structured as closed-ended funds pursuing generally illiquid and private investment opportunities. In recent years, we have seen an increasing ‘convergence’ between open and closed ended fund structures to facilitate the offering of strategies meeting at the edge of, if not straddling, these two realms. Whilst traditional activist (or engaged) fund strategies have always demanded a compromise between traditional open and closed ended fund structures, this convergence was significantly accelerated following the 2008 financial crisis as fund managers moved into less liquid credit strategies. In the midst of the opportunity set, a range of approaches were taken to access the space and both closed-ended and open-ended limited liquidity fund structures being utilized. We will use the term ‘private credit’ to describe this industry (which grew significantly post-2008 as investment banks retreated from the space and investment funds were established to meet the resulting demand).
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