BlackRock has posted a first close on its European Middle Market Private Debt Fund II with a total of €1.2 billion, and another €300 million in segregated mandates. The fund manager will continue to raise capital in the first half of next year as it seeks a final close of between €2 billion and €2.5 billion. The final figure may even rise above €2.5 billion depending on the appetite for segregated mandates.
The firm’s debut European Middle Market Private Debt Fund posted a first close in March 2016 and went on to announce a final close of €1.1 billion in June 2017. That fund was fully invested within two years of a planned three-year investment period and has delivered performance “in line with expectations”, according to Stephan Caron, BlackRock’s head of European middle market private debt.
The second fund, which was launched in June this year, has so far attracted commitments from 24 existing and new investors. Caron said that, amid concern about the economic cycle, investors were responding well to BlackRock’s focus on defensive industries such as healthcare, software and business services.
He also highlighted the firm’s local network in Europe, with private debt professionals on the ground in the UK, France, Germany and Benelux. The private debt team is also able to leverage BlackRock’s presence in all the major European capitals.
The investment period for Fund II remains at three years. However, Caron said he would not be surprised if it followed in Fund I’s footsteps by investing the capital in a shorter timeframe should market conditions remain similar.
Caron said BlackRock targets the “core mid-market” where companies generally have EBITDA of between €10 million and €30 million. He claims this space has moderate levels of leverage, good pricing and better documentation standards than the upper mid-market. “There are some levels of concern about the documentation,” he pointed out.
BlackRock has 15 professionals dedicated to the European mid-market private debt strategy. It also has access to 10 analysts in the firm’s European leveraged finance platform and 12 global capital markets professionals who source opportunities across alternative assets.