Kayne’s $3bn direct lending fund to target 10-12% net return

The vehicle will invest $15m-$50m per transaction into mid-market businesses.

Kayne Anderson Capital Advisors has closed its third mid-market direct lending fund on $3 billion of investable capital, of which almost half has been committed, the firm said in a Thursday statement.

The Los Angeles-based alternative lender raised that total across its commingled Kayne Senior Credit Fund III, accompanying separately managed accounts and leverage. Fund I collected $355 million, while Fund II rounded up $1.1 billion, according to the firm’s website.

The vehicle will target a 10-12 percent net internal rate of return and an 8 percent yield, according to investor documents from the San Bernardino County Employees’ Retirement Association.

Kayne Anderson typically charges a 1-2 percent management fee on committed or invested capital and up to 20 percent in carried interest, according to the firm’s Securities and Exchange Commission registration.

A representative for the firm could not be reached for comment.

Fund III will cut cheques of $15 million-$50 million per transaction to companies with $10 million-$50 million of EBITDA and $50 million-$500 million in revenue, the SBCERA materials showed. It will invest in companies both with and without a private equity sponsor.

Approximately $1.4 billion has been committed since the fund’s initial March 2017 closing, Ken Leonard, managing partner of Kayne Middle Market Credit, said in a statement.

PDI data show 30 percent – or $18.47 billion – of the $61.56 billion, raised for private credit funds in the first six months of the year is dedicated to senior debt. Last year, senior credit funds raised $26.05 billion in the first half of the year.

Even though the strategy collected more in the first half of 2017, proportionally senior debt funds collected more over the same time frame in 2018. Last year’s first-half total for senior debt funds made up slightly more than 23 percent of the $111.96 billion raised over the same time period.

The firm is also in the process of raising a business development company, according to an SEC exemptive relief application. The vehicle, Kayne Anderson BDC, will invest mainly in senior secured, unitranche and split-lien loans to mid-market companies.

It is also raising its debut fund, the Kayne Solutions Fund, which will invest across the Kayne Anderson credit platform and in opportunities that don’t fit the firm’s current fund mandates. The vehicle, which is targeting $750 million-$1 billion, has a 10-year life and will aim for a 10-15 percent net IRR, the SBCERA investor documents showed.

Founded in 1984, Kayne Anderson oversees $29 billion in assets across private credit, growth equity, energy and infrastructure, and real estate. In addition to its Los Angeles headquarters, the firm has offices in Atlanta; Boca Raton, Florida; Chicago; Dallas; Denver, Colorado; Houston; and New York.