Emerging markets debt fund manager Cordiant has held a final close of $350 million on the Cordiant Emerging Loan Fund IV (CELF IV), the firm said in a statement.
Investors include insurance companies and pension funds, Cordiant said. The fund has a relatively high concentration of investors, Evan McCordick, managing director at Cordiant Capital, told PDI. Except for one Canadian investor, they are Europe– and UK–based. The weighting of the fund in terms of LPs is towards large European insurance companies with the balance being European pension funds, he said. London-headquartered development finance institution CDC Group committed $50 million prior to a first close of the fund on $250 million in April 2013.
Cordiant launched this fourth debt fund with an initial target of $1 billion, and later downsized the target to $500 million. However, McCordick said that the firm is happy that the fund closed and “particularly thrilled with the relationships we have at closing because these are long-term investors that are not looking at emerging markets opportunistically”, he said. He added that he considers these to beinvestors which are at an early stage of a core strategy. “We are not chasing yield here. We are trying to build strong performing portfolios that on a risk-adjusted basis compare well to developed market peers,” he said.
The fund will invest primarily in senior secured loans issued to emerging market private sector borrowers, with an emphasis on diversification across countries and sectors. It will “very selectively” do some subordinated lending, he said. The Montreal-headquartered firm said in a statement that the fund would allow institutional investors to take advantage of the growing imbalance in emerging markets between demand for bank–style funding and Western banks shrinking their balance sheets.
Private debt has established itself as a viable alternative to traditional bank financing, Bertrand Millot, president and chief executive of Cordiant, said in a statement. “The demand for stable financing in developing markets continues to expand as these countries seek to grow and modernize, resulting in attractive opportunities for those with a long-term horizon,” Millot continued. “The wide range of borrowers who raise money through the private loan market also allows investors to look beyond sectors like oil and gas that tend to dominate the emerging market bond market,” he added.
Cordiant has developed an investment pipeline across sectors including infrastructure, manufacturing and financial services. The fund targets loans with “high levels of collateral and strong covenants, and benefit from measures that mitigate political risk,” Millet said.
Loans from the fund are typically floating rate, providing a hedge against interest rate rises, the firm said. Cordiant manages four emerging market loan funds, the ICF Debt Pool, one private equity fund and the Canada Investment Fund for Africa.