The Math Behind an 8% Yield: How LBC Capital Income Fund, LLC Keeps Returns Predictable

When investors hear “8% return,” it’s often met with skepticism: Can it be sustainable? What’s the catch? At LBC Capital Income Fund, LLC, that 8% isn’t a flashy promise—it’s a carefully calibrated outcome grounded in yield mechanics, fee discipline, and proactive underwriting. Here’s a deep dive into how we structure performance to respect this target with precision.

1. Start with Floating Interest Rates: Automatic Inflation Protection

Hard money and private debt funds typically charge floating rates tied to benchmarks like SOFR (Secured Overnight Financing Rate), plus a spread. As of March 2025, SOFR was around 4.31%, with forward curves suggesting rates between 3.6%–4.1%, reflecting pressure from prior lows.

If LBC Capital Income Fund, LLC lends at SOFR + 400 bps, a 4.31% base plus 4% spread equals 8.31%, right in our target range. Structuring loans this way means as the benchmark rises with inflation or Fed policy, so does income—helping returns remain real, not just nominal.

2. Yield Spread & Fee Structure: What LBC Retains vs. Distributes

Private debt analysis (Kitces) shows that private debt strategies yield 8%–10% net-unlevered. Benchmark comparisons find private debt outperforming investment-grade bonds (~8%) and high-yield credit (~6%) by several percentage points.

That means from a gross loan yield (e.g. 8.3%), LBC Capital Income Fund, LLC must deduct operating costs:

• 1% management fee
• Up to 0.5% servicing/origination
  Even net of fees (~7.0%–7.5%), distributions to investors remain in the 8%–8.5% annual range, sustained by lender discipline.

3. Short Loan Cycles: Reducing Volatility and Opportunity Risk

Long-term infrequent loans are vulnerable to market shifts. LBC Capital Income Fund, LLC avoids this by funding 6–18 month loans, with an average under 12 months. This structure ensures steady re-deployment and responsiveness—active risk management baked into fund operations.

It also lets us optimize yields and credit quality frequently. Market downturn? We pivot. High interest environments? We capitalize. It’s a yield smoothing strategy that’s hard to replicate in long-duration funds.

4. Risk-Adjusted Returns: Yield Premium Made Real

Private debt typically trades at a yield premium of around 2.2% over comparable B-rated exposures. Add LBC’s credit discipline and tight spread control, and a consistent 8%–8.5% net yield delivers compelling, risk-adjusted returns.

Even Wall Street track record confirms this: private credit has outperformed public credit and equities by approximately 2%–3% over the long term.

5. Monthly Cash Flow: Compounding Without Waiting

Unlike public bond funds that may linger on volatility or private equity with stagnant returns, LBC disburses interest monthly. That means $100k invested earns ~$667/month, which can be reinvested immediately—smoothly compounding returns over time without reinvestment delays.

Even in higher-rate environments, holding monthly distributions instead of accumulating them greatly magnifies long-term gain.

6. Sensitivity Example: What Happens if Rates Shift

Here’s a look at how returns react to benchmark changes:

In rising interest rate periods, investors benefit immediately – without active management. In falling rate environments, yields normalize, but so does income predictability. That net spread remains stable.

7. Inflation’s Hidden Value: Yield Keeps Pace

As inflation eats into fixed income, floating rate debt protects principal. Private credit’s floating structures shield investors from the real value erosion seen in static yield instruments .

On top of that, our conviction in capital preservation and rotating capital means investor real income remains steady, unlike fixed coupons that get locked in early.

8. The Track Record: Yield Demonstrates the Math

LBC Capital Income Fund, LLC’s actual performance echoes this thesis:

• 2023 gross yield: 8.3%
• 2024 gross yield: 8.2%
• 5-year average net yield: 8.1%
• Zero missed distributions in 13+ years

It’s proof that textbook yield math aligns with real-world outcomes, when underwriting discipline is in place and volatility is managed.

Final Take for Analytical Investors

The formula’s simple, but the execution is hard. Our predictable 8%-8.5% returns come from:

• Floating rate + spread
• Conservative fees
• Strategic loan duration
• Plus re-positioning each month

It’s a built-in buffer, not a bull market illusion – enabling accredited investors to enjoy true income stability backed by math, not hope.

Want a custom model in your portfolio? Reach out – and we’ll run your scenarios with real data and clarity.