IAM Group plans high-yield fund – exclusive

Based on investor demand, the firm is launching a fund with smaller loans, higher yields and potentially floating interest rates.

Integrated Asset Management Group (IAM) is planning on launching a private debt fund focusing on high-yielding loans. The fund is in response to demand from existing IAM investors for a higher-yielding offering.

Philip Robson, president of the Canadian-based firm’s private debt group, told PDI the goal is to manage an offering with a fixed yield between 8 and 12 percent. The fund will invest in smaller loans than the firm’s other products, focusing on borrowers with between C$5 million and C$50 million ($3.9 million to $39 million; €3.4 million to €34 million) in EBITDA.

These borrowers would have a credit rating equivalent to B or BB, Robson added. The fund’s goal is to always be the sole lender, providing senior-secured amortising structures to potential borrowers.

The firm is aiming to raise between C$200 million and C$300 million for the offering. “It’s not going to be a big fund,” said Robson. “We want to put our toe in.” He added the firm is aiming to get its investors comfortable with the risk/reward profile of this higher-yielding segment of the private debt space.

As far as origination is concerned, Robson noted the firm will aim to target borrowers who previously hadn’t met the thresholds for IAM’s other debt fund products. “There’s a couple of hundred million over the past couple of years where we’ve said, ‘Sorry, can’t help you,’” he said.

The fund will have a management fee between 75 and 125 bps. Robson says the fund will take approximately three years to deploy capital and will not use leverage.

IAM’s private debt group closed an infrastructure debt fund in September last year following two years of fundraising. In November 2015, the firm closed its fifth mid-term private debt fund on C$667 million.