·The Dash
The risks of private credit: what can go wrong
An honest breakdown of private credit risks — default, illiquidity, currency, regulation — and how a fund reduces (but doesn't remove) them.
Anyone promising “15% a year with no risk” is misleading you. High yield always comes paired with risk. Here’s an honest list of what can go wrong in private credit — and how it’s managed.
1. Borrower default
The main risk: a business fails to repay.
- Mitigation: loans are secured by collateral and cash flow; borrowers are vetted against statements and tax filings.
- Residual risk: executing collateral does not guarantee full recovery, and large losses can reach investors.
2. Illiquidity
Capital is locked for the investment period; you can’t withdraw at will.
- Mitigation: short trade deals turn over quickly; quarterly exit windows exist.
- Residual risk: early exit is only in windows and at a discount.
3. Currency and country risk
Some assets are in emerging-market currencies.
- Mitigation: hedging instruments are used.
- Residual risk: hedging does not fully remove the risk and has a cost.
4. Regulatory and sanctions risk
Changes in regulation, taxes, or sanctions across jurisdictions can affect fund structure and distributions.
How investor protection works at The Dash
- First-loss capital. The Dash’s own capital sits at the bottom of the stack and absorbs losses before investors.
- Seniority. Investors are in the super-senior tranche: repaid first, hit by losses last.
- Risk selection. Only vetted businesses with clear turnover are financed.
This reduces risk but does not make the investment risk-free.
Bottom line
Private credit suits the slice of a portfolio you can commit for a term and with an understanding of risk. If you need a guarantee and liquidity, it’s not your instrument.
Returns are targets and not guaranteed. Investments are illiquid and carry the risk of partial or total capital loss. This material is informational and is not an offer or investment advice.