Antares Capital has closed its second senior loan fund with $6 billion of investable capital, exceeding its target of $5 billion.
The fund, SLF II, includes a dedicated co-investment vehicle, Antares said in a statement. Like its predecessor senior loan fund, SLF II will invest in sponsor-backed, senior secured loans to US and Canadian borrowers, the statement said. The latest fund, which was launched in December 2021, had its first close in April 2023 at $1.8 billion, according to Private Debt Investor research. It is about twice the size of its predecessor, which held a final close in September 2020 on $3 billion, per PDI research.
SLF II has invested about $2 billion of capital across more than 80 investments, Vivek Mathew, Antares head of asset management, told PDI. He said he believes the fund likely could have raised more, had Russia not invaded Ukraine, and had investors not experienced the denominator effect created by volatility in public market investments. The fund has both levered and unlevered sleeves, with the unlevered sleeve targeting returns of 8-9 percent, and the levered, as much as 14-15 percent.
“We don’t want to make things big for the sake of being big, but we felt the opportunity in private credit warranted a bigger fund” than Antares’ earlier senior fund, Mathew said. He noted that the current environment is very attractive for putting money to work, given that leverage is more than a turn lower, and terms and conditions are much more favorable with interest rates higher than in prior years. Moreover, because Antares sourced the leverage just before the Russian invasion, it was able to get cheaper financing than would have been the case after the invasion, he said. “We’re buying today’s assets at elevated spreads and financing them with yesterday’s costs.”
More than 75 percent of existing investors participated in SLF II, the statement said, with Mathew adding that about 10 percent came from investors in the Middle East. That marked a big change for the region’s investors, who have historically allocated to traditional fixed income and equities, and, in alternatives, to private equity and domestic real estate. Altogether, more than 50 institutions globally, including investors from public and private pensions, insurance companies, asset managers and banks, participated in SLF II.
Because of the denominator effect, “many of the fund’s investors who reupped with Antares did so at the expense of not allocating to other alternative asset classes,” Mathew said. He noted that Antares’ funds, “being truly first lien with solidly double-digit returns and invested in sponsor-backed businesses” adds to their attractiveness, given that they are yielding more than some expect many equities to yield.
Antares, founded in 1996, is a Chicago-based private credit manager with more than $61 billion under management as of 31 March 2023.