Cairn raises return expectations for loan fund

London-based fund manager Cairn Capital has raised €115 million of additional capital from two institutional investors – the identity of which it declined to disclose – for its Cairn European Loan Fund.

The firm said both investors had exposure to the fund prior to the market volatility in March and have chosen to increase their allocations since. Including the new capital, the open-ended fund now has around €380 million in assets under management.

A source at the firm said it believed it had the capacity to raise the fund’s capital to €1 billion under current market conditions and that it would review its fundraising efforts should the fund reach that size.

The source added that ELF, which is the firm’s only pure-play loan fund, typically targets returns of 4-6 percent net per annum but in the current climate was expecting outsized returns of around 7-9 percent net per annum.

The fund, which is managed by chief investment officer Andrew Burke and portfolio manager Loic Prevot, invests mainly in broadly syndicated, senior secured floating rate loans to large, non-investment-grade European corporates.

It also invests opportunistically in mid-market, subordinated and/or SME loans with a compelling risk/reward.

“The fund was defensively positioned going into the covid-19 crisis, and the new capital will position the fund well to pursue new opportunities and dislocations within the current market environment,” said Burke.

Cairn Capital, which is majority owned by Italian investment bank Mediobanca, was founded in 2004 and had AUM of around $5.2 billion on 29 February 2020 across multi-strategy and single-strategy commingled funds, single-investor segregated accounts and CLO vehicles.

The loans team has been investing in European loans since 2006 and, since then, has invested over €9 billion in aggregate across more than 1,200 facilities and 480 issuers.