Debt Ratio

The debt ratio is a financial metric that measures the proportion of a fund's total debt relative to its total assets. It indicates the extent to which a fund relies on borrowed funds to finance its investments.

Context

The debt ratio helps assess the risk level of a fund by showing how much of its assets are financed through debt. A higher ratio may imply greater financial leverage and risk, while a lower ratio suggests a more conservative approach with less reliance on debt.

Example

If a real estate fund has $100 million in assets and $40 million in debt, its debt ratio is 40%. This means that 40% of the fund's assets are financed through debt, impacting its risk profile and potential returns.