Certior raises €51m for first close of SME FoF

The new vehicle will look for primary and co-investment opportunities with funds focused on smaller companies.

Finland-based fund of funds manager Certior Capital has held a first close on a follow up to its 2016 Credit Opportunities Fund, seeking up to €300 million.

The vehicle, Certior Credit Opportunities Fund II, could be significantly larger than its predecessor, which closed on €87 million in October 2016.

Certior said it has already raised €51 million for the fund from a group of Finnish institutions. All the investors are returning investors and the next stage of fundraising will be to reach out to LPs across Europe.

The fund will focus on European SME direct lending and will be particularly interested in seeding new managers in the credit space. It will focus on investment in the European Union and other European countries such as Norway, Switzerland and the UK once it leaves the EU next year. It will consider making cornerstone investments in funds as well as co-investments.

The vehicle is structured as a Luxembourg special limited partnership to facilitate investment from institutions across Europe. Loyens Loeff in Luxembourg is the fund’s legal adviser while reporting will be provided by Munich-based Assetmetrix.

Ari Jauho, chairman of Certior Capital, said banks are showing little interest in SME lending and that private debt fundraising has also neglected opportunities at the smaller end of the market.

“While a lot of capital has been raised for direct lending funds targeting a limited pool of larger transactions, SME direct lending funds focusing on €5-25 million loans have seen far less fundraising,” he explained. “As a result, SME direct lending still looks very attractive from a risk-adjusted basis.”

He added that smaller loans can offer investors a high cash yield, attractive pricing and upside potential, better terms for lenders and full covenants.

The new fund aims to achieve returns of between 8-10 percent net to investors with a diversified pan-European portfolio of over 200 senior secured and asset backed loans.

The firm’s first Credit Opportunities Fund is currently 70 percent invested and has made seven primary commitments, seven co-investments and one secondary investment with a bias towards the UK, German-speaking Europe and Spain.