Platform Operations & Performance Due Diligence
Initial due diligence is conducted on a lending platform based on an estimation of allocations to debt instruments offered or originated by that lending platform. Such due diligence includes an evaluation of past investment history as well as size and scope of present and future investment volume. Appraisal of the platform’s business practices, past or predicted debt instrument performance, regulatory status and other issues and risks are also taken into account.
Platform Underwriting Due Diligence
The investment advisor assesses the platform’s own underwriting procedures with respect to borrower applicants. Direct lending platforms typically use multi-credit and risk rating models within their underwriting criteria used to assess the creditworthiness of borrowers. In addition, the emergence of big data processing has enabled direct lending platforms to develop a more efficient and effective means of analyzing and classifying credit risk across numerous debt instrument categories.
Borrower Applicant Due Diligence Undertaken by the Investment Advisor
The investment advisor’s additional credit analysis on such debt instruments is applied for investment in cases where the investment advisor is able to actively select investments pursuant to the relevant platform agreement. In addition to indicators such as credit scores, the investment advisor places emphasis on a variety of underlying factors from credit bureaus as well as other sources. The investment advisor has also developed an artificial intelligence (AI) technology, TruSight Technology, which has been used with select portions of the strategy’s portfolio and actively used for investment selection since inception of the strategy. When sufficient history of past loans from a lending source is available, the investment advisor will engage TruSight Technology. When sufficient history is not available, investments are primarily selected based upon the underwriting rules and classifications used by the lending source in conjunction with guidelines developed by the investment advisor.
Monitoring of Debt Instruments
The investment process is reviewed on an ongoing basis by members of the investment team. Using a “dashboard” of key performance indicators and automated email alerts, members of the investment team are made aware of material changes in loan selection, investment amounts, loan performance, etc. Parameters used by TruSight Technology, when applicable, and the investment policies and procedures can then be modified by the investment team as they endeavor to adapt to the changing economic environment.