Invesco, WL Ross bank loan fund nears $125m

The two firms’ strategy is a departure from the dime-a-dozen mid-market direct lending funds.

UPDATE: The Invesco WLR Credit Partners Fund has raised $123.22 million, according to its most recent Securities and Exchange Commission regulatory filing. That figure is lower than the anticipated $200 million by year-end.

Invesco and affiliate WL Ross & Co. are set to have $200 million rounded up by the end of the week for its closed-end fund that will target bank loans, according to a source familiar with the situation.

Invesco WLR Credit Partners Fund, which is seeking $500 million and has a $750 million hard-cap, has already held a first close on $125 million fund, this person said. The vehicle is a partnership between the two firms to invest in bank debt of stressed companies, and will seek to buy undervalued bank debt and sell it at a higher price, the source explained.

A firm representative could not be reached for comment.

The fund has a five-year life – consisting of a two-year investment period and a three-year harvest period – making its duration shorter than many other closed-end credit funds, Private Debt Investor previously reported. Terms for the fund, launched in April, include a 1.5 percent management fee on invested capital and a 20 percent incentive fee along with an 8 percent hurdle rate.

Other vehicles have raised significant capital raised for other stressed and distressed financial assets, such as nonperforming loans particularly in Europe, with Apollo Global Management’s European Principal Finance Fund III securing $4.3 billion. But Invesco-WLR fund’s locked-up, bank loan strategy diverges from many of the mid-market direct lending funds investing in privately originated credit being launched.

Many first-time vehicles are pulling in considerable sums, such as Northleaf Capital Partners’ debut fund, which closed on $670 million. Across the entire market, $130.69 billion was raised over the first three quarters of 2017 – surpassing last year’s $122.05 billion and barely edging out 2013’s record of $130.08 billion.

The fund may be finding strong investor interest, as many fund managers and advisory firms have said that the glut of mid-market direct lending funds means those with a more niche strategy have a better chance of standing out.

Investor appetite for private credit continues to be strong, according to a recent Coller Capital survey, with six times as many European LPs set to increase their allocation to the asset class than decrease it (44 percent and 7 percent). For their part, five times as many North American LPs plan to increase their exposure to private credit than decrease it (32 percent and 6 percent).

Invesco, which managed $937.6 billion as of 30 November, announced plans to buy WL Ross in July 2006 for up to $375 million, according to a statement at the time. The deal closed in October of that year. The purchase price consisted of a $100 million upfront payment along with five annual earn-out cash payments of up to $55 million each.