We like to tell stories about alternative investments and Fintech as our sector continues to expand. Click below to read our insights on our rapidly changing space. If you have any questions, click here.

Past & Future

January 23rd, 2022

Quarterly Commentary

Sometimes, it is best to look back to chart the future. In 2021, our commentaries covered a lot of ground, and they serve as our compass for the coming year.

We reminisced on how we broke free from traditional alternative investing to embrace a future centered around digital transformation, especially in private credit. This journey has been wildly satisfying because it nurtures our desire to innovate products that address the primary pain point of many fixed income allocators.

We focus on digital private credit as an asset class given its core features: small balance, short duration, amortizing, and non-traded. When properly constructed, a portfolio in this asset class can achieve asymmetrical risk-adjusted real returns (adjusted for inflation), with low correlation to listed securities.

We offered a “101” on digital private credit to help educate allocators and participants on some of the basics. One of our primary takeaways is that more education on the asset class is required, and we intend to offer more this year. We reminded our readers of the simplicity in the asset class, what we view as a winning proposition: digital private credit is at its core an obligation between a borrower and a lender. An investment manager in the space constructs a portfolio with those obligations.

Often, we asked why digital private credit has not yet been adopted by many allocators as a bona fide fixed income alternative. Despite being put to the test in 2020, digital private credit emerged as a standout performer because many of the asset class’s inherent features can be an ideal antidote to idiosyncratic risk. On several occasions, we discussed the absolute and relative performance of digital private credit, in a world where the real returns on most U.S. dollar-denominated fixed income indices ended negative.

In a world awash in fabrications and alternative interpretations rooted in fantasy, we recognized the good fortune of the digital private credit asset class, which revolves around irrefutable data and numbers. This allows a rational, logic-driven investment manager to make objective investment decisions. Transparency is prominent.

We watched Fintech grow up over the past year, with several companies raising significant capital in private and public markets. New Fintech-enabled product offerings like Buy Now Pay Later (“BNPL”) became part of the mainstream consumer experience across general retail, as well as in specific sectors, like leisure travel. We participated where we thought it made sense.

With this backdrop, where do we see digital private credit going in 2022? Fintech will continue its push into the mainstream, as our mantra that “Every company will be a Fintech company” marches towards fruition. New investment capital into Fintech companies will catalyze the creation of new products and services that will likely become part of a portfolio’s investment mosaic. In our opinion, a strong macroeconomic backdrop should continue to support healthy credit performance, recognizing that we will see some expected normalization from 2021 levels. Finally, we believe more institutional allocators will accept that the asset class merits a core allocation. Credit performance and opportunity growth have been and should continue to warrant attention. On to 2022.


Confidentiality and Non-solicitation: No information herein constitutes an offer or a solicitation to buy or sell any securities or any interests in any product or investment strategy managed by HCG Fund Management LP (“HCG”).  Any offer or solicitation relating to any such investment will be made only by means of confidential offering documents relating to a particular fund  or investment contract and only in those jurisdictions where permitted by law.
Reliance: This information may not be relied upon for investment decision-making purposes. It does not contain all the information necessary to make an investment decision, including the risks, fees, and investment strategies of investment products advised by HCG. Eligible investors are described in official offering documents, all of which must be read in their entirety and will supersede the information contained herein.  No offer to purchase any securities or interests by a prospective investor will be made prior to receipt of all official documents, and no offer to purchase any securities or interests will be accepted without receipt of all official documentation that has been completed to HCG’s satisfaction.
Opinions — No obligation to update:  The information contained herein represents the views and opinions of HCG.  It is intended solely for informational purposes and is not intended to constitute investment, legal, tax or accounting advice.  The views about digital finance investing and estimated future investment opportunities expressed herein reflect those of HCG management as of the date herein and are a reflection of our best judgment at the time.  They are subject to change based on market and other conditions, and we have no obligation to update.  Actual results, however, may prove to be different from our expectations.  No warranty is given to the completeness or the accuracy of the information contained herein.
Suitability and Risks:  Any investment in products managed by HCG is appropriate only for financially sophisticated investors capable of analyzing and assessing the associated risks fully disclosed in the Private Placement and/or Information Memoranda. Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The Private Placement and/or Information Memoranda contain this and other information about the investment. A prospective investor should have no need for liquidity with respect to its investment and should view it as long-term and not a trading vehicle.  Additional risks are disclosed in the Private Placement and/or Information Memorandum including, including, limited liquidity and restrictions on transfer of the securities, dependence on HCG’s principals, and short operating history of certain productsAs with all private investment funds, investments are deemed speculative and involve risk of loss.
Third Party Data: We do not verify third party data used in certain calculated metrics shown here.