Although a sponsor may better ensure profitability by having its private credit fund lend to companies in which its PE fund already owns an equity stake, it also comes with the risk of conflicts of interest caused by the dynamic between those stakes. That can require compromises by the private credit fund that not all sponsors are willing or able to stomach, including holding a reduced investment stake, forgoing a seat at the table when negotiating terms and ceding ongoing management to other lenders in the syndicate. To help sponsors thoughtfully evaluate the risks and potential mitigants associated with captive investing by their PE and credit funds, the Private Equity Law Report interviewed a number of attorneys with extensive experience with those situations. This second article in a two-part series sets forth how sponsors can reduce their investments, negotiating role and ongoing management of debt stakes in captively owned investments to avoid conflicts of interest. The first article summarized the risks of captive investing, while also exploring how third‑party verification of terms (e.g., using valuation firms) can mitigate risks. See “What Must a PE Sponsor Consider Before Launching a Private Credit Strategy? (Part One of Two)” (Feb. 4, 2020); and “Credit Fund Specialist Discusses Trends in Fund Formation and the Credit Fund Space” (Aug. 23, 2018).