He said it
“Investors are worried that the Covid-19 pandemic will overwhelm frontier markets, causing immense economic fallout, however, we think those concerns are overblown. In our view, they are young, dynamic economies which are potentially poised for a V-shaped recovery, rebounding faster than other markets.”
Warren Hyland, portfolio manager at New York-based fund manager Muzinich & Co, in a press release about why now is a good time to invest in frontier markets
First look
Alcentra hunts for BDC assets
Business development companies that have been hammered by the global pandemic are feeling the heat from lending sources to make strategic and tactical moves (see our June cover story, which predicted the carnage). Sources close to Alcentra say the London-based private debt fund manager is on the hunt for assets of underperforming BDCs that are available for sale. Indeed, Alcentra, a unit of Bank of New York Mellon with more than $40 billion under management, is actively in the process of raising capital so it can try to capture some of those assets at attractive prices, the sources said. Stay tuned.
A statesman for our time
Today marks the publication of Haldane: The Forgotten Statesman Who Shaped Modern Britain by John Campbell, co-founder and chairman of private markets advisory firm Campbell Lutyens. One of the most intellectually formidable political leaders of his time, Richard Haldane (1856-1928) devoted his life to building modern institutions for Britain’s education, medical research, defence and intelligence systems that would stand the test of time, and which continue to benefit the country to this day.
Of particular interest to PDI’s readership at a time when covid-19 is pushing governments into becoming much larger lenders, guarantors and shareholders to companies: alongside an immense range of other pressing topics, the polymathic Haldane had much to say about how the state should align with the private sector and exercise informative and supportive governance to help deliver long-term sustainable outcomes. Campbell’s inspiring account presents Haldane’s legacy as exemplary of the rational, principles-based and highly effective statesmanship that’s in such short supply nowadays. Highly recommended reading.
Reflections on the fund finance boom
The liquidity crisis has clearly given fund finance professionals a shot in the arm. As Leon Stephenson, co-head of the funds finance practice at law firm Reed Smith, said of NAV facilities in a webinar produced by the firm (requires registration): “I’ve been working in and exploring this area for most of my career. It’s finally getting going at a rapid rate.”
Stephenson is seeing a record number of NAV facilities, which sit below the fund level but above the portfolio company level and are secured on the cashflow of funds rather than on LP commitments.
However, Gavin Rees – head of the global funds banking team at Silicon Valley Bank and a participant in the webinar – cautioned against the commoditisation of the NAV market. “Rather than a one-off financing, we ask how an NAV facility will assist the client,” he said. “It’s important to see it in relationship terms: Where will it be used in the life of the fund? What’s the need for it and why has that need arisen?”
The webinar’s well worth a listen to understand more about the pros and cons and some of the practical challenges of NAV facilities – which look like they’re here to stay.
Data snapshot
Senior debt still rules roost. Investors have piled into senior debt strategies over the last few years and there’s no immediate sign of that changing in our H1 2020 global fundraising data. Despite the market turmoil currently being experienced, distressed debt fundraising is at modest levels – though much of the capital for this strategy may already have been raised prior to the start of this year. For our interactive H1 2020 fundraising presentation, click here.
Essentials
Talking sub lines with the pros
Sister title Private Funds CFO editor Graham Bippart appears on Cadwalader, Wickersham & Taft’s most recent “Fund Finance Friday: Industry Conversations” webcast with Michael Mascia. He discusses his recent subscription credit line series, which also features interviews with Fund Finance Partners’ Zachary Barnett and Whitney Namm Pollack of Project Sunshine. You can find the whole sub line series, “Subscription credit: A shifting landscape”, on this page, or by heading to www.privatefundscfo.com.
First Eagle swoops into ABL market
One of the big questions since the coronavirus outbreak has been around how to access liquidity, and one of the answers is by using company collateral such as inventory, machinery and equipment and intellectual property. Expect, therefore, asset-based finance to be increasingly in the minds of fund managers looking to add a growth strategy to their existing platform.
This is precisely what Boston-based First Eagle Alternative Credit has done with the appointment of Larry Klaff and Lisa Galeota to head up a new asset-based lending solutions unit as part of its direct lending platform. They join from established asset-based financier, Gordon Brothers Finance Company (also based in Boston), where they worked together for more than 13 years and were involved in over $1 billion worth of facilities.
LP Watch
Institution: Maine Public Employees Retirement System
Headquarters: Augusta, US
AUM: $15.1bn
Allocation to alternatives: 50.9%
Maine Public Employees Retirement System approved a €100 million commitment to Ares Capital Europe V at its July 2020 board meeting, a contact at the pension informed Private Debt Investor.
Ares Management’s fifth vehicle in its direct lending series is targeting €9 billion, which will be the largest fundraise in Ares’ history if successful. The vehicle’s immediate predecessor closed at €6.5 billion in July 2018.
The $15.1 billion US public pension has a 5 percent target allocation to private debt that currently stands at 4.7 percent.
MainePERS’ private debt fund commitments tend to focus on senior debt funds with a North American or European focus.
Institution: Nebraska Investment Council
Headquarters: Lincoln, US
AUM: $26.39bn
Allocation to alternatives: 13.5%
Nebraska Investment Council has agreed to commit $54 million to Torchlight Debt Opportunities Debt Fund VII, a contact at the pension informed Private Debt Investor.
Debt Fund VII will seek to blend investments in varying degrees of risk and return. The fund will be investing 70 percent in private markets and 30 percent in public markets.
The pension fund’s recent commitments are to funds focused on the real estate sector within the North America region.
Today’s letter was prepared by Andy Thomson with John Bakie, Robin Blumenthal and Adalla Kim.
If you do not receive this within five minutes, please try to sign in again. If the problem persists, please email: