Latest Alcentra fund triples size of its predecessor

The BNY Mellon subsidiary now has more than €5.7bn committed to offerings focusing on direct lending to European entities.

Alcentra has closed fundraising for its second Europe-focused direct lending product, the firm announced. The fund focuses on providing direct lending financing to mid-market companies.

The Clareant Europe Direct Lending Fund II closed on €4.3 billion. The offering launched in 2015 with a target of €2.0 billion, Jack Yang, global head of business development for Alcentra, told PDI.

Yang said he attributes the fund beating its fundraising target to the performance of its predecessor. Alcentra closed its first European direct lending fund with more than €1.5 billion in 2014.

“The feedback we got from investors is we were able to invest the [first] fund faster than what they were seeing with other managers,” Yang said. He added investors were also pleased with the first fund’s risk-adjusted returns. He declined to mention specific performance figures. Documents from the Oklahoma Tobacco Settlement Endowment Trust, one of the fund's LPs, showed that as of last 31 March 2016, the fund achieved a 9.37 percent net internal rate of return.

Alcentra now has €5.7 billion in committed capital contained in funds and separately-managed accounts focusing on direct lending to European middle-market companies. For the most part, the firm focuses on lending to companies domiciled in Western and Northern Europe. “We want to lend to companies in countries we would consider to be creditor friendly,” Yang said.

According to PDI data, additional LPs include the US-based New Hampshire Retirement System and Orange County Employees Retirement System and the UK-based Strathclyde Pension Fund.

The vehicle will target a net IRR from 8 – 10 percent and has a six-year term, which can be extended by up to two years, according to documents from the Oklahoma Tobacco Settlement Endowment Trust. The management fee is 1 percent on called equity amounts though can be knocked down by 0.25 percent for investors committing over €75 million. The fund has a 10 percent carried interest with a 5 percent hurdle rate and catch-up mechanism.