How Heron Finance outperformed peer private credit funds

For the full 2025 calendar year, Heron Finance’s private credit program outperformed peer private credit funds (on average) as well as a public credit benchmark.

Heron Finance: Stronger across key risk metrics

Heron’s strong returns didn’t come at the cost of higher risk. Compared to the private credit peer group, for example, funds on the Heron platform show significantly-lower risk across key metrics:

Table disclosure: Data from SEC filings and fund reporting. Returns shown for the trailing 12-month period ending on 12/31/2025 based on NAV and distributions. See full disclosure for peer group and metric details.* See Metric explanations >

Heron’s portfolio construction drives performance

Heron's 9.1% net return wasn't luck — it was built on rigorous portfolio construction. While our process doesn't guarantee success, our risk and return results are in line with our goals.

Our private credit investing portfolios use a diligent approach to credit evaluation. We select funds to include in our client’s portfolios using a proprietary scoring model along with in-depth manager due diligence. 

This foundation keeps us focused on portfolio management for our clients, rather than industry noise — and there was plenty of it over the past year:  

• High-profile bankruptcies took center stage
• BDC stocks experienced dramatic selloffs
• Funds we don't invest in reported rising defaults
• A big bank CEO made cautionary comments

In the face of all of that, Heron portfolios outperformed peers.

Our results — across both return and risk metrics — reinforce two core principles: 

1. Diversify broadly: We offer automated exposure across thousands of global private credit assets, designed to reduce concentration risk and hedge against volatility.
2. Partner with experienced managers: Heron selects from 100+ of the largest U.S. private credit funds to build a balanced portfolio of funds that are managed by firms averaging 20+ years in track record and collectively overseeing more than $1 trillion in aggregate private credit assets.

Metric explanations

• Underperformance: Percentage of total investments portfolio performing below fund manager's expectations, based on fair market value.
• PIK interest: PIK interest income as a percentage of gross total investment income. PIK interest (Payment-in-Kind) is a financial term where a borrower pays interest on a loan or bond by issuing more debt or equity rather than cash. This allows companies to conserve cash, but it increases the total debt principal over time, making it riskier and often resulting in higher overall interest costs.
• Non-accruals: Non accruals as a percentage of total investments portfolio, based on cost. Private credit non-accruals represent loans where borrowers have stopped paying interest/principal.
• Loss rate: Trailing 12-month realized investment loss, net of gain, as a percentage of average fund net asset value

*Data from SEC filings and fund reporting. Returns shown for the trailing 12-month period ending on 12/31/2025 based on NAV and distributions. Returns shown as total returns based on NAV for Heron and peer group, and based on market prices for others.   Dataset includes 73 of the largest U.S. private credit funds that Heron Finance has fully underwritten (61 of which are the peer group and 12 of which are the funds on Heron), which are actively managed by firms that collectively manage in excess of $1 trillion in private credit assets across relevant funds and accounts. Peer Group funds were selected for comparison because of their overlapping approaches with the funds in Heron’s private credit strategies (e.g., lower middle market, core middle market, and upper middle market), and collectively they represent a majority of the private credit industry in the U.S. A full list of the peer group is available upon request.  Heron return is based on actual portfolio, taking into consideration weights of private credit funds over the course of the year.  Risk metrics for Heron Finance vs. Peer Group based on average (mean) data.  “Underperforming Assets” based on underlying fund managers’ assessment, shown in terms of fair market value; “PIK Interest” shown as payment in kind interest income divided by total investment income; “Non-Accruals” based on non-accruals by amortized cost; “Loss Rate” based on realized investment loss, net of gain, divided by average fund net asset value on a trailing four-quarter basis. Comparison of the Heron’s performance to any particular index, financial instrument, or third-party fund (each a "Benchmark") performance is not without complications. Among other things, there may be variance in active vs. passive management, potentially more or less diversification than the Benchmark, difference in expenses incurred, disparity in access to investment opportunities, liquidity profile of investing and/or of underlying investments, and possibly additional limitations or restrictions. Accordingly, any such comparisons are for informational purposes only and should not be construed as having a direct association.