How it Works

Private credit — also called “private lending” or “direct lending” or “private debt” — refers to a type of financing where investors lend money directly to businesses, without going through a traditional bank or public market.

Unlike bank loans, which are funded using customer deposits, private credit is funded by private investors, such as asset managers, institutional funds, or high-net-worth individuals. These loans are not listed or traded on public exchanges — they are private agreements between the lender and the borrower.

Because of this direct, non-public nature, the terms of private credit deals can often be more flexible. Lenders and companies can negotiate terms that suit both parties, including customised repayment schedules, interest rates, and collateral requirements. This makes private credit a valuable option for businesses that need capital but may not meet the strict criteria of banks, or that prefer alternative funding to issuing equity.

For investors, private credit offers an alternative asset class that may provide higher yields than traditional fixed-income investments, though it typically involves longer holding periods and less liquidity. As a result, private credit is playing a growing role in portfolios that seek diversification, income, and exposure to real-economy lending opportunities.

On Altify, we list private credit investments that target a 9% to 14% annual yield, after all fees, with interest distributions made quarterly to provide investors with recurring income.

Today, Altify offers one flagship private credit investment product — the ALFI USD Private Credit Note, which provides exposure to a diversified portfolio of loans extended to vetted UK law firms.

These loans are originated and managed by Fenchurch Legal, a specialist lender, and are structured as senior secured debt. To mitigate risk, each loan is secured by After-The-Event (ATE) insurance, which protects the investment in the event of unsuccessful legal cases. Additionally, the loans are further secured by director guarantees from the borrowing law firms.

This investment offers an 11% annual fixed return (in USD), with interest distributed quarterly. Fenchurch Legal employs rigorous selection criteria, focusing on law firms with strong track records and institutional backing, to ensure robust risk management and consistent returns for Altify investors.

There is a mismatch between the structure of litigation and traditional lending criteria, meaning law firms often struggle to secure the funding they need through traditional channels. Banks are not set up to lend against the future proceeds of legal cases, particularly when those cases have uncertain timelines.

Litigation finance fills that gap. Funders like Fenchurch Legal provide flexible, fast funding solutions that align with the structure and cash flow needs of legal claims. The rates Fenchurch Legal charges reflect this speed, and the specialist expertise involved — something traditional lenders simply don’t offer.

These funding solutions are specifically designed for law firms, unlike traditional loans, which tend to have rigid terms and slow approval processes.

While After-The-Event (ATE) insurance helps reduce downside risk, it doesn’t change the fact that law firms need flexible, case-aligned finance. And there's still the complexity involved for a funder in assessing cases and monitoring performance, which is why litigation finance requires specialist expertise.

Fenchurch Legal offers tailored facilities. Once a law firm has a facility in place, firms can draw down funds as needed to support new cases. Interest is only paid for the time the funds are used, so if a case settles early, the loan can be repaid, and the funds can be drawn down again on future cases. This provides an efficient, revolving source of funding.

ALFI, Altify's private credit investment offering, provides higher yields primarily due to its private nature and the associated liquidity premium.

• Private Nature and Liquidity Premium: Unlike publicly traded investments, private credit is not easily bought and sold. This illiquidity demands a premium – an additional return that compensates investors for the longer holding periods.
• Expertise and Complexity: Sourcing, structuring, and managing private credit transactions require significant expertise and due diligence. This complexity justifies the expectation of higher returns to reward investors for the associated effort and risk.
• Market Inefficiency: Private credit markets often exhibit lower transparency and efficiency compared to public markets. This relative inefficiency can create opportunities for higher returns.

Additionally, there is a mismatch between the structure of litigation and traditional lending criteria, meaning law firms often struggle to secure the funding they need through traditional channels. Banks are not set up to lend against the future proceeds of legal cases, particularly when those cases have uncertain timelines.

Litigation finance fills that gap. Funders like Fenchurch Legal provide flexible, fast funding solutions that align with the structure and cash flow needs of legal claims. The rates Fenchurch Legal charges reflect this speed, and the specialist expertise involved — something traditional lenders simply don’t offer.

These funding solutions are specifically designed for law firms, unlike traditional loans, which tend to have rigid terms and slow approval processes.

While After-The-Event (ATE) insurance helps reduce downside risk, it doesn’t change the fact that law firms need flexible, case-aligned finance. And there's still the complexity involved for a funder in assessing cases and monitoring performance, which is why litigation finance requires specialist expertise.

Fenchurch Legal offers tailored facilities. Once a law firm has a facility in place, firms can draw down funds as needed to support new cases. Interest is only paid for the time the funds are used, so if a case settles early, the loan can be repaid, and the funds can be drawn down again on future cases. This provides an efficient, revolving source of funding.

Altify charges an annual management fee of 0.55%, calculated on your total invested amount and deducted from quarterly distributions.

‍Additional fee considerations:

• Early Redemption Fee: If you request and are approved to redeem your ALFI tokens before the investment's maturity date with 14 days' notice, a 5.00% early redemption fee will apply to the total invested amount, including accrued interest. Please note that redemptions are subject to market conditions and cannot be guaranteed.
• Fiat Currency Conversion Fee: When depositing a fiat currency, you’ll need to convert it to USDC or USDT before investing in ALFI, incurring a transaction fee based on your Altify Rewards level. A complete list of fees for other Altify investments is available here.

The minimum investment amount is the equivalent of $100.

Yes, investors can apply to sell and redeem their ALFI holdings for USDC or USDT with just 14 days' notice. However, redemption requests are subject to market conditions and cannot be guaranteed.

Additionally, if you decide to sell before the investment’s maturity date you’ll forfeit any accrued interest and incur a 5% early redemption fee based on your total invested amount. This fee is applied when your redemption request is approved.

Example: If you invest 100 USDC/USDT and receive 100 ALFI tokens on 1 January 2025, then on 10 December 2025, nearly 12 months later, you decide to sell all your tokens, you would need to apply for redemption with 14 days' notice. After approval, a 5% fee is applied, your accrued interest is removed, and on the specified date, you would receive 95 USDC/USDT.

💡 Lock-up periods refer to you needing to keep all of your funds invested for a specific period of time.

💡 Redemptions refer to you being able to pull some or all of your money out of a private credit investment.

Yes, we are regulated across multiple jurisdictions.

Europe
Coinpanion Crypto Services Sp z o.o. (“Altify EU”) is a Virtual Asset Service Provider (VASP). Altify EU is a private company incorporated in the Republic of Poland. Altify EU is registered as a VASP in Poland and appears on the Polish VASP register bearing KRS Number 0001030633 and NIP Number 7252330350. Altify EU is registered to provide exchange and/or intermediation services pertaining crypto assets and related means of payment. Altify EU has adopted and maintains an AML policy that reflects and is compliant with the applicable local laws and the FATF’s Risk Based Approach to AML/CFT and PF measures.

South Africa
Altify SA Capital (Pty) Limited (“Altify Capital”) is an authorised financial services provider (FSP) in the Republic of South Africa with registration number 52727. Altify Capital holds a non-advisory Category I and Category II licence from the FSCA in respect of a wide range of financial products including crypto assets, shares, money market instruments, bonds, warrants, certificates and derivative instruments. More information is available directly from the FSCA here. Altify Capital is likewise an Accountable Institution registered with the Financial Intelligence Centre (FIC) and maintains a comprehensive AML policy and RMCP.

Altify SA DAS (Pty) Limited (“Altify Crypto”) is a Crypto Asset Services Provider (CASP) with registration number 53289. Altify Crypto holds a non-advisory Category I and Category II licence from the FSCA in respect of crypto assets. More information is available directly from the FSCA here. Altify Crypto is likewise an Accountable Institution registered with the Financial Intelligence Centre (FIC) bearing registration number 54051 and maintains a comprehensive AML policy and RMCP.

It’s important to note that Altify crypto accounts do not fall under local banking laws and that investments in cryptocurrencies, at this time, are not covered by the Financial Ombudsman Service or subject to protection under the Financial Services Compensation Scheme.

Private credit investments provide many benefits, some include:

1. Higher Potential Returns: Private credit investments often provide higher yields compared to traditional fixed-income investments like bonds or money market funds. This is due to the higher risk associated with private credit and the illiquidity premium investors receive.
2. Diversification: Private credit investments can diversify a portfolio beyond traditional stocks and bonds. They offer exposure to different sectors and types of borrowers, reducing overall portfolio risk.
3. Income Generation: Many private credit investments generate regular income through interest payments. These payments can be structured to provide a steady cash flow, making them attractive for income-focused investors.
4. Less Market Volatility: Private credit investments are less sensitive to market fluctuations compared to stocks, as their returns are primarily driven by contractual interest payments and borrower performance rather than market sentiment.
5. Potential for Capital Preservation: Some private credit investments, particularly those secured by collateral or with strong borrower credit profiles, offer a measure of capital preservation relative to higher-risk assets like equities.
6. Access to Niche Markets: Private credit allows investors to access niche markets and sectors that may not be easily accessible through public markets. This can provide opportunities to capitalise on specialised knowledge or market inefficiencies.

Private credit investments are subject to several risks, some include:

1. Credit Risk: The investment involves loans that are subject to the risk of loss if a creditor fails to repay. Lending to third parties always carries inherent uncertainties. The value of these loans is also subject to fluctuations based on broader credit market pricing.
2. Liquidity Risk: There is a risk that loans may decrease in value due to the absence of willing buyers, regardless of the underlying credit quality.
3. Redemption Risk: Should there be a high volume of simultaneous redemption requests, some investors may need to defer their withdrawals to subsequent quarters. Additionally, our private credit partners reserve the right to suspend withdrawals if necessary.
4. Interest Rate Risk: Private credit usually holds floating rate loans, which adjust in response to changes in interest rates, unlike fixed-rate bonds. This approach aims to protect against interest rate volatility.
5. Currency Risk: Fluctuations in exchange rates can significantly impact the returns, as the value of the foreign investment may decrease when converted back to US dollars. This risk is inherent in cross-border financial activities and is not covered by protective measures, potentially affecting the overall investment performance.
6. Concentration Risk: Investing a large portion of funds in a single economic sector or geographic region can lead to higher volatility and greater risk of loss if that sector or region faces economic downturns.
7. Regulatory Risk: Changes in regulations can affect the viability and profitability of investments in private credit. For example, new financial or tax regulations could alter the landscape dramatically, impacting returns and operational conditions.
8. Operational Risk: This includes risks associated with inadequate or failed internal processes, people, and systems, or from external events. This can range from simple administrative errors to major disruptions caused by system failures or other operational issues.
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9. Credit Spread Risk: This risk arises from an increase in the credit spread of the issuer, independent of the general movement of interest rates. An increase in perceived risk of the issuer can widen the credit spread, impacting returns.
10. Reinvestment Risk: For private credit instruments generating regular income, there is the risk that the returns from these investments cannot be reinvested at an equally profitable rate due to fluctuating interest rates or changes in market conditions.
11. Counterparty Risk: This is the risk that the counterparty to a transaction (such as a derivative or hedging contract) may default on its obligations, impacting the returns of the investment.

These risks highlight the critical need for investors to carry out comprehensive due diligence, invest only within their financial capacity, choose reputable and trustworthy private credit partners, and continually monitor their investment landscape.

Altify mitigates the risks associated with its private credit investment opportunities by partnering with established, market-leading private credit specialists.

‍Key Risk Mitigation Strategies

• Senior Secured Credit Focus: Our partners prioritise senior secured credit, which provides the highest priority claim on borrower assets in the event of financial distress. This strategy significantly reduces risk compared to subordinate debt or equity, which are repaid only after senior obligations are met.
• Rigorous Due Diligence and Expertise: Altify's partners conduct in-depth due diligence, leveraging their specialised expertise in specific sectors. While robust credit agreements and financial covenants are essential for enforcing financial health, we acknowledge that lending inherently involves risk.