Leveraging Expertise: The Value of Partnership Between Law Firms and Fund Administrators in Private Credit Funds

Launching and managing a private credit fund is a complex, multifaceted endeavor requiring a seamless collaboration between fund managers, legal counsel, and fund administrators. Private credit funds, which invest in senior secured, junior, subordinated, and distressed assets, operate in a highly regulated environment where structuring, operational workflows, and compliance must align precisely to ensure efficiency and investor confidence.

This article, co-authored by Crowell & Moring LLP and Petra Funds Group, highlights key operational and legal considerations in forming and running private credit funds, emphasizing how the partnership between law firms and fund administrators facilitates successful fund management. Drawing on their experience working inside funds and now as service providers, Christopher Mendez, senior counsel at Crowell, is a former in-house GC/CCO, and Adam Weiss, Managing Director and the Head of Private Credit at Petra, is a former in-house credit COO, offers a unique perspective on common questions that often call for third-party insight.

Below are key considerations to keep in mind from legal, accounting, and operational perspectives.

Structuring and Operational Considerations

Private credit fund structures, whether open-end, closed-end, or hybrid, present distinct challenges in terms of liquidity, valuation, and accounting. The legal and administrative teams must work together to establish appropriate valuation policies, subscription and redemption mechanisms, and investor reporting protocols. This collaboration is particularly crucial when funds employ complex structures such as master-feeder arrangements, special purpose entities, or leveraged investment vehicles.

Legal counsel plays a critical role in structuring private credit funds by drafting key documents, including limited partnership agreements, private placement memoranda, and investor side letters. These documents must accurately reflect fund terms and operational workflows, necessitating ongoing coordination between legal teams and fund administrators. Fund administrators bring essential credit-specific expertise, ensuring the fund’s operational setup aligns with its investment strategy and regulatory requirements.

Performance, Management Fees, and Accounting Complexities

Private credit funds require specialized accounting methodologies distinct from those used in private equity or hedge funds. Credit fund waterfalls must account for recurring cash flows, loan amortization, and non-performing loan adjustments. As a result, fund administrators need strong, flexible systems capable of capturing and tracking these variables in real time. At the same time, legal counsel plays a critical role in ensuring that waterfall structures and fee calculations remain consistent with fund documents and investor agreements.  A knowledgeable fund administrator who can interpret these documents and translate them into accurate workpapers for tracking returns and cash flows is essential to maintaining accounting integrity. Because the structural nuances across credit, equity and hedge strategies vary widely, the required expertise does too. Engaging early with the professionals managing financial systems and data helps foster alignment, ensuring that calculations and reporting outputs are accurate from day one.

Management and performance fee structures in credit funds introduce additional complexities. Valuation methodologies, including fair value assessments and impairment reviews, must be transparent and well-documented to prevent disputes. The interplay between GAAP accounting, fund structuring, and tax implications requires legal and administrative teams to maintain an ongoing dialogue to optimize efficiency and compliance.

Regulatory Compliance and Risk Management

Private credit funds are subject to an evolving regulatory landscape, requiring fund managers to stay ahead of compliance obligations. Law firms advise on fund-level regulatory filings such as Form ADV and Form PF, while fund administrators provide critical data and operational support. Together, they ensure funds maintain robust policies for AML/KYC compliance, valuation, liquidity management, and fee allocations.

Beyond compliance, risk management is a cornerstone of private credit fund operations. Fund administrators employ sophisticated portfolio monitoring tools to track credit exposures, defaults, and covenant compliance. Legal teams assist in structuring investor disclosures and fund governance frameworks, ensuring alignment with regulatory expectations and investor requirements.

Fund Launch & Growth Considerations

First-time managers and those actively fundraising often face a range of legal, accounting, operational and structural challenges. Establishing the right foundation from the start with experienced advisors and reliable third-party service providers is critical. A well-designed infrastructure supports day-to-day operations and signals to institutional investors that your fund is built to institutional standards.

New credit managers commonly encounter questions around fund expense classifications, third-party valuation requirements, the use of leverage or other financing mechanisms, and how the fund waterfall is structured. Having access to professionals who have navigated these questions before can save time, prevent costly missteps and streamline future adjustments. It is also important to understand which third parties are best suited to support your fund based on its strategy, structure and jurisdiction.

Conclusion

Successful private credit fund management hinges on the seamless collaboration between legal counsel and fund administrators. Law firms provide the legal framework and regulatory oversight, while administrators bring operational expertise and financial reporting capabilities. This synergy ensures funds can efficiently launch, scale, and navigate regulatory complexities while delivering transparency and value to investors.

By leveraging deep institutional knowledge and best practices, Crowell & Moring LLP and Petra Funds Group help credit fund managers optimize fund operations, mitigate risks, and enhance investor confidence. Whether launching a new fund or refining an existing structure, our combined expertise provides a strategic advantage in today’s evolving credit markets. The expertise gained from working in-house also extends beyond our firms and encompasses our combined networks within the industry. There are often questions about how other GPs are adhering to certain regulatory changes or what the best practice is for an in-house shadow of quarterly NAV. Having a dedicated team of individuals willing to leverage their own knowledge and that of like-minded peers in the industry helps to ensure the fund manager is properly aligned with best practices in the industry. Contact us to explore how we can support your credit fund’s legal and administrative needs.