HEDGE FUND ALERT - Lending Strategy Wins Support

Princeton Alternative Funding, LLC is well ahead of its fund-raising schedule for a vehicle that finances subprime consumer loans.

The Princeton, N.J., firm had hoped to debut its Princeton Alternative Income Fund with “friends and family” money, then raise up to $50 million from outsiders by yearend. But the fund launched on March 3 with about $50 million of committed capital — prompting the manager to lift its yearend equity-raising goal to $100 million.

The bulk of the money came from just two backers. One is a multi-billion-dollar U.S. financial firm that pursues a mix of alternative and traditional investments, while the other is a $200 million U.K. asset manager specializing in direct-lending strategies.

The stronger-than-anticipated demand from investors has allowed Princeton Alternative to expand the fund’s lending program. It started out supplying lines of credit to four specialty
finance companies that in turn originate short-term loans to customers of used-car dealerships, auto-repair shops, rent-to-own furniture stores and other businesses catering to lower-income borrowers. The original expectation was that the fund eventually would extend credit to a dozen or so financing companies, but the plan now is to be working with up to 25 by yearend.