BlueBay closes on €800m for direct lending fund

The Royal Bank of Canada subsidiary will focus on mid-market opportunities in the UK and Northern Europe with its latest vehicle, which closed well over its €500m target.

Royal Bank of Canada subsidiary BlueBay Asset Management has closed its direct lending fund on €800 million, well above the firm’s initial target of €500 million, according to a statement released Tuesday.  

The fund received commitments from pension funds, insurance companies and family offices, according to the release, as well as a €175 million to €350 million commitment from Ireland's National Pension Reserve Fund. “It all depends on the amount of third-party investment raised,” a spokesman for NPRF confirmed in a statement earlier this month. A surge in demand from other Irish pension funds and US investors means that NPRF’s contribution to the fund will be on the lower end of that spectrum.  

The direct lending vehicle will provide between €20 million and €100 million in senior and subordinated loans to UK and Northern European companies, with a focus on businesses with enterprise values of less than €500 million. The firm had invested approximately 20 percent of the vehicle as of Tuesday.

Like many firms that have launched direct lending or credit vehicles recently, BlueBay cited an unmet demand for mid-market financing that has grown as banks have retreated from their traditional lender roles.

“The fund will provide much needed growth capital to European mid-market businesses, whether privately or publicly owned, as well as a source of finance to private equity sponsors,” said the firm’s head of private lending Anthony Fobel in a statement. “The growth in direct lending funds is providing a real financing alternative to companies and private equity firms in an environment of continued retrenchment by banks from mid-market lending and we are seeing a large number of exciting investment opportunities.”

Fobel also attributed the firm’s fundraising success to investors’ continuing search for yield, which senior credit provides at a relatively lower risk premium.

BlueBay was founded in 2001 and maintains offices in London, the US, Luxembourg, Hong Kong and Japan. The firm managed $55.7 billion for institutions and high net worth individuals as of 31 March, according to its website.