It is important to understand that our Ark Bedrock fund accesses its pool of investments by investing in Ark Wholesale Fund loan investments alongside other syndicate investors. This makes Bedrock essentially a proxy for the Ark investment strategy.

As an investor you get the benefit of a full time, professional, experienced manager looking after your investment, whilst you ‘set and forget’. You get a manager constantly focused on risk and opportunity, managing the portfolio to ensure that capital is employed when it should be (and not when it shouldn’t) with the goal of optimising returns and minimising risk.

Diversification is the textbook answer to unsystematic risk—those idiosyncratic events that affect a single borrower or project. In practical terms, the pooled structure does the heavy lifting for investors by allocating capital across many loans rather than concentrating it in one or two exposures.

Statistically, the reduction in portfolio volatility can be measured through the lens of standard deviation, a concept well understood by quantitative investors. When capital is spread across, say, 20–30 loans, the risk (as measured by the standard deviation of returns) doesn’t just decline—it reduces non-linearly. Even assuming imperfect correlation between loans (which is realistic), the total portfolio risk drops substantially compared to holding a single loan or a small handful.

Put another way: the more independent (or loosely correlated) loans you add, the more the ‘outlier risk’ of any one loan impacting portfolio returns shrinks. That’s not theoretical – it’s the mathematical underpinning of why pooled credit funds have proven resilient, even during market disruptions.

Another practical benefit: pooled funds often produce a smoother income profile. Because income is aggregated across multiple loans, seasonal or project-specific cash flow variations are absorbed by the collective. This can be especially helpful for investors who rely on monthly distributions for budgeting or reinvestment.

From a governance perspective, our pooled Bedrock fund draws on the same rigorous credit assessment framework Ark applies in its contributory Ark Wholesale Fund loans. In fact, as noted already all Bedrock’s investments are in Ark Wholesale Fund loans. The investment exposure type is the same – just with the additional overlay of managed diversification.

For investors who don’t wish to assess each mortgage themselves—or who prefer a simpler entry into the asset class – our Bedrock fund removes the need for individual due diligence, while still delivering access to the same quality of secured credit. It also allows smaller investors to access a more diversified portfolio than they could otherwise achieve on their own.

Imagine an investor puts all their capital into one mortgage loan that earns 10% per year, but because of project-specific risks (delays, partial repayments, borrower stress), the return might vary — say, ±3% each year. That variation, or volatility is measured by standard deviation. So here, the standard deviation is 3%.

Now let’s say the same capital is instead invested across 25 different loans (which is about where our Bedrock Fund is presently), all with roughly the same return and similar risk profiles. Because the loans are not perfectly correlated (they don’t all rise or fall together), the combined portfolio is much less volatile. Statisticians can model this: the standard deviation of a diversified portfolio reduces roughly by the square root of the number of investments, assuming independent risks.

So:

In a well-diversified pooled mortgage fund holding 20–30 loans, risk (volatility of returns) can shrink from 3% down to about 0.6–0.7% – a fivefold reduction in uncertainty. Put simply: the more quality loans in the pool, the less chance one problem loan moves the needle. You still earn the same average return (say 10%), but with a much narrower range of outcomes.

That’s why diversification isn’t just a buzzword — it’s a proven, measurable way to smooth the ride.

Sophisticated investors understand the theory behind diversification. But in private credit—where each asset is bespoke, and risks can be amplified by concentration—practising that theory through a pooled fund structure can be a smart, time-efficient way to manage risk and pursue steady income.

At Ark, we believe in giving investors the choice between hands-on loan selection and professionally managed diversification. The Bedrock fund is simply the latter, executed with the same care, diligence, and alignment that underpins all our investments.