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Next Edge to wind down flagship credit fund after halting redemptions

A surge in redemption requests has prompted private debt manager Next Edge Capital to gate its flagship credit fund, leaving clients unable to access their money and the firm now planning to wind down the portfolio over the next two years, according to a report by the Globe and Mail.

The move is the Toronto-based asset manager’s second wind-down of a private debt fund, with the firm having been in the process of closing the Next Edge RCM Private Yield Fund, whose credit adviser is RC Morris Capital Management, since 2020.

That fund saw a 25% loss in March and a loss of 18% for 2023, with the vehicle at risk of increasing losses as it becomes more concentrated and subject to wider performance fluctuations.

Created in 2015, the Next Edge Private Debt Fund lends to companies that typically cannot obtain bank financing. Over its first eight years, the fund often posted solid returns between 7% and 9% annually, but performance dipped in 2023, with redemption requests now sitting at 20% of total assets.

According to the report, Next Edge now feels the best option is to wind down the portfolio and roll its investors into a different fund in the future. The firm has now capped the existing fund’s monthly payouts at a 6% annual yield – only 1% higher than some guaranteed investment certificates – and halted redemptions.

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