Leverage and Borrowing Costs in Interval Funds: Q4 2024

Leverage ratios and borrowing costs among interval funds showed significant dispersion in late 2024. For funds on the ALTIDAR platform reporting between September 30 and December 31, the average leverage ratio was 14.1%, with an average interest rate of 7.4%. Individual fund data reflect either period-end values or, where unavailable, averages over the reporting period. While report timing, disclosure practices, borrowing timing and terms, and base rates vary across funds, the dispersion across strategy, asset type, and scale still offers a useful high-level view.

Key Observations

• Scale Advantage – Larger, established managers like Apollo and PIMCO generally appear to borrow more cheaply, possibly reflecting the pricing power that comes with scale and institutional credibility.

• Risk Pricing – Higher rates for funds like Cliffwater Enhanced Lending and Variant Alt Income may reflect how lenders price in the risk profile of more complex or niche credit strategies.

• Real Estate Dispersion – Real estate funds posted the widest ranges: leverage from 7.3% to 41.2%, and interest rates from 5.4% to 12.4%, reflecting varied strategies and liquidity profiles.

• Outliers – Bluerock TI+ RE reported the highest rate (12.4%), potentially driven by its exposure to long-duration, illiquid assets with uncertain cash flows and large capital commitments. Redwood RE Debt was the most levered (41.2%) but reported a moderate interest rate, likely consistent with its focus on short-duration, direct real estate loans.

Takeaway: Leverage alone reveals little. Its relevance depends on both its cost and the fund’s broader strategy. High leverage at low cost may suggest efficiency and lender confidence, while low leverage at high cost could point to structural risk or complexity. Examining both together, and in context, is critical to assessing fund-level risk.

Not investment advice.