Here are some potential risks for investors when private debt managers withhold information:
- Lack of transparency: When private debt managers withhold information, it can make it difficult for investors to fully understand the investment strategy and activities of the manager, which can increase the risk of investment losses 1 2 .
- Increased risk exposure: When private debt managers withhold information related to risk exposure, it can make it difficult for investors to evaluate the level of risk in their investments, which can increase the risk of investment losses 1 .
- Illiquidity: Private debt loans are often less liquid than broadly syndicated loans, which can make it difficult for investors to understand the level of risk in the market 1 . When private debt managers withhold information, it can make it even more difficult for investors to evaluate the liquidity of their investments.
- Hidden costs: Private debt managers may use complex structures that can create substantial leakage for investors, making it difficult for investors to understand the fees and costs associated with their investments 3 .
- Reduced returns: When private debt managers withhold information, it can make it difficult for investors to fully evaluate the investment opportunity, which can lead to reduced returns 4 .
In summary, when private debt managers withhold information, it can increase the risk of investment losses, increase risk exposure, reduce returns, and make it difficult for investors to evaluate the liquidity and fees associated with their investments. Family offices should conduct thorough due diligence, ask specific questions, and collaborate with other family offices to ensure that private debt managers are transparent about their investment strategies and activities.