BNP Paribas Asset Management (BNPP AM) has launched its first private debt fund targeting UK SMEs.
The BNP Paribas UK SME Debt Fund 1 is a closed-ended vehicle that will provide senior loans to UK firms with annual turnover of less than £50 million.
The fund will lend an average of £1.5 million to each company and aims to have between 150-200 individual loans across a diversified portfolio, giving a total capacity for the strategy of £300 million.
BNPP AM said at present the fund has no firm target or lifespan. It will raise capital predominantly from UK pension funds and other institutions and, once the fund’s capital has been fully committed, the firm will look to launch a second vehicle.
The fund is being launched to fill the funding gap SMEs are currently experiencing as a result of banks reducing their lending capacity, BNPP AM said.
Stéphane Blanchoz, head of SME alterative financing at BNPP AM, explained: “Banks remain a key feature of the SME lending market and investment funds have traditionally been providing financing in the upper end of the mid-market area, while smaller companies are increasingly accessing finance through fintech crowdfunding solutions or peer-to-peer lending.
“We are targeting SMEs between these two market segments, where there are opportunities for businesses to contribute to UK GDP growth, but where sustainable funding solutions are limited.”
BNPP AM has already been active in private debt lending in the UK with an SME lending platform. It has also entered into strategic partnerships to help extend its reach in the UK market, including its November 2017 acquisition of a stake in SME credit specialist Caple, and earlier this month the firm announced a strategic alliance with CODE Investing, a UK fintech lending platform.