Debt Fund Spread Calculator

Debt fund spreads drive fund returns. This calculator shows levered fund return from rate spread.

Borrower rate

Fund leverage rate

Leverage %

Origination fee %

Fund levered return

21.82%

Fund equity share rate

35.00%

Gross spread (bps)

475

How the math works

Levered return = (borrower rate − leverage rate × leverage %) ÷ (1 − leverage %) + origination fee.

Debt fund leverage magnifies both upside and downside. A 60-65% leverage ratio typically doubles equity IRR on spread but also doubles the draw pace under warehouse margin calls. Fund diligence should test the warehouse agreement terms, not just the asset-level returns.

How to Use

Enter borrower rate %.
Enter fund leverage rate %.
Enter leverage %.
Enter origination fee %.
Read fund levered return.

Frequently Asked Questions

Debt fund structure?

Fund originates loans at SOFR + 4-8%. Uses warehouse leverage at SOFR + 1-3%. Returns spread times leverage multiplier. 60-75% leverage common; 10-14% net returns to LPs at scale.

Risk?

Credit risk on underlying loans. Warehouse call (lender margin call during stress). Defaults (loan-level loss before fund returns hit). Funds with tight warehouse terms failed 2020 and 2023 during stress events.

Spread dynamics?

Bridge (2-3 yr): 350-500 bps spread. Construction: 400-600 bps. Mezz: 700-1200 bps. Preferred equity: 900-1500 bps. Each adds risk premium; higher spread often reflects higher LTC, subordination, or execution risk.

How do I benchmark this?

Benchmark against industry data from NCREIF, IREM, Yardi Matrix, CoStar, or RCA. Institutional operators also benchmark internally across their own portfolio to identify operating outliers. A single number means little; the trend and the peer comparison mean everything. Run quarterly benchmarks and note deviations that exceed 10% — those warrant investigation.