mcp’s article on credit lines published by PEI
A new article authored by Montana Capital Partners dives deeper into one of private equity's contentious topics right now: credit lines. With a large increase in usage due to a low interest environment, more and more investors are concerned about a credit line's impact on the overall fund performance. To evaluate the impact, mcp equipped a large sample of buyout funds with a credit line and compared the multiple and IRR with and without a credit line. mcp finds that over the full life-time over a fund, the performance can only be improved considerably for funds with a strong performance to start with, which should mitigate concerns that fund managers are able to inflate their track record in the long run. However, investors should be cautious for interim performance numbers as they can be impacted substantially by the use of a credit line.