Debt felt safer, right up until I couldn't get my money out

I put $75k into a private fund that made short term bridge loans on apartment complexes, mostly 100 to 300 unit value-add deals. The pitch was that we sit ahead of the equity, first lien, 65% to 70% loan to cost, and that even in a bad market the equity takes the hit before we do. I believed that and I still think the basic logic is right.

What I didn't read was the redemption section. Quarterly liquidity, 90 day notice, and a gate that limits total redemptions to 5% of fund assets in any quarter, at the manager's discretion. I read the word "quarterly" and stopped.

When a lot of the underlying borrowers stopped paying at the same time, everybody asked for their money at once. The gate came down. I filed a redemption request 14 months ago and I've received about 19% of it. The fund also marked NAV down 18%, because loans they'd have to foreclose on are secured by properties now worth 20 to 30 percent less than the 2022 numbers those loans were sized against. First lien at 70% of a value that fell 25% is not the cushion I pictured.

Two things I'd do differently. I'd read the liquidity terms before the return terms, because the return terms don't matter if you can't leave. And I'd have asked what the loans were underwritten to, specifically whether the appraisals behind them were 2021 and 2022 vintage. A first lien is a position in a value, and if the value moves the position moves with it.

I'm not writing this off. I expect to get most of it back eventually. But "eventually" was not part of what I thought I was buying, and I'm the one who didn't check.