How to Read Notes to Financial Statements: CRDEX Case Study, Part 1
And why you want to start here
The golden age of private credit might be sunsetting (if you read newspapers). But if you happen to be a retail investor on Crowd Street’s mailing list, it looks more like it’s just getting started:
Don’t get me wrong, I’m all for broadened access.
The trouble is, if the end investor is tasked with picking the fund, they’d better know what they’re doing.
Today, I’ll walk you through a high-level, first-pass review of a private credit fund’s financials. This isn’t a full deep dive. Think of it as a how-to you can use to evaluate similar offerings on your own.
❗ I’m not picking on StepStone (or Crowd Street, for that matter). I’m using a ’40 Act fund because the financials are publicly available. The framework is the same for Regulation D offerings (many hard money funds fall into that bucket). But in those cases, you’ll need to request the financials directly from the manager, ideally the last four quarters.
This post is Part 1. You’ll find Part 2 here:
Here are the first five things I check in the notes to the financial statements:
Fund structure
Valuation methodology
Fees
Debt
Unfunded commitments
Before you curl up in fetal position and start crying (or worse, stop reading), I’ve included LLM prompts at the end of this post to help translate the accounting mumbo-jumbo.
Disclosure: This case study is provided for educational purposes only and does not constitute an offer, solicitation, or recommendation to buy or sell any security or financial instrument. Nothing herein should be construed as legal, tax, investment, or financial advice. All opinions are my own and may change without notice. Readers should perform their own due diligence and consult qualified professionals before making any investment decisions.
Background
StepStone Private Credit Income Fund (CRDEX) is an evergreen interval fund registered under the Investment Company Act of 1940 and the Securities Act of 1933, and domiciled in Delaware. It’s a new vehicle: operations commenced in June 2024.
There are no eligibility limitations: investors do not need to meet accredited investor criteria. A truly “democratized” offering.
👉 If you want a full evergreen fund refresher, start here:
The fund promises diversified private credit exposure, daily subscriptions, quarterly liquidity* (more on that below), low minimums, and 1099-DIV tax reporting.
Anyone who has dealt with K-1s understands the appeal of a 1099. (A sore subject in my household every April, but I digress.)
To their credit, StepStone makes it easy to find the annual and semi-annual reports: they're listed right on the fund website.
👉 If a fund you're evaluating doesn't do this, SEC filings aren't hard to find — this article has step-by-step instructions:
1. Fund Structure
Fund structure isn’t the most important thing, but it’s where I usually start.
Why? Because I want to know how old the fund is and whether it’s structured as an interval fund, a tender offer fund, or something else (It also happens to be the first section in the notes, which makes life easier).
👉 If you need a refresher on the structural differences, start here:
Back to CRDEX: