Benchmarking a closed-end bridge fund against the open-end debt aggregate is comparing two different animals

Question

The open-end debt aggregate was up 5.5 percent year to date gross of fees through Q3 2025, against 4 percent for the equity index. Every closed-end bridge fund deck on my desk cites those numbers, and then reports its own performance net to the LP, levered, on a book with a two year average loan term.

The index is an aggregate of open-end vehicles that mostly hold longer duration, lower coupon, lower leverage paper, and it is gross of fees. A short duration bridge book at a 10 or 11 percent coupon with a warehouse line behind it should beat that number in a benign year by construction, and it will lose to it badly in a year where three big loans go non-accrual. Comparing them tells me almost nothing about whether the manager is any good.

So what do you actually measure against. I've been using a loss-adjusted yield built off the tape, coupon minus fees minus facility cost minus my own default and severity assumption, and comparing that to a fixed hurdle rather than to any index. The problem is my default assumption is doing all the work and I picked it out of the air. The index at least has other people's real numbers in it.

What are the rest of you comparing a debt fund to, and how do you defend it when the manager pushes back?

wendy_park48 · Answer

The gross of fees part is the whole trick and most decks never restate it. Take the index number, then subtract the management fee and the promote you'd actually pay in the vehicle in front of you and you've moved the comparison by a couple of hundred basis points before you've looked at a single loan. Then look at where the fee is charged. Committed capital, invested capital, and gross asset value produce very different numbers on the same book, and a fund charging on gross assets with a warehouse line is charging you on the lender's money too.

On your default assumption, I'd stop trying to pick one number. Run three, a benign case, the manager's own historical loss rate from their loss list, and a case where the two largest borrowers both stop paying, and see whether the ranking of the funds you're looking at changes. If it doesn't change, the assumption isn't doing the work you think it is. If it does, you've found the fund whose return depends on nothing going wrong.

Benchmarking a closed-end bridge fund against the open-end debt aggregate is comparing two different animals

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