Loan Note: All the latest mid-market trends; insurers want more private debt

Find out all the latest trends in the mid-market with our newly published Mid-Market Lending report. Plus: insurers reveal strong appetite for private debt and abrdn launches new real estate debt fund. Here's today's brief for our valued subscribers only.

They said it

“A yield curve inversion typically signals a recession distantly out in the future, though my interpretation is that the current inversion is only a warning signal of possible future economic woes.”

Taken from a commentary by David Chao, global market strategist for Asia-Pacific (ex-Japan) at Invesco

First Look

Our insights into the mid-market
The five key trends in mid-market lending today: the impact of inflation, supply-chain disruption, the importance of maintaining discipline, the rise of the sector specialists and the continuing relevance of generalists. Find out more about all of these in our newly published Mid-Market Lending Report 2022.

The report also contains our A-Z of healthcare, with each letter representing an important facet of a sector that has grown in popularity in recent years among equity and debt investors alike. You can probably guess that the ‘c’ is for covid – many of the others will be less obvious.

Private equity and debt get insurance thumbs-up
When it comes to where they want to allocate their money, private equity is the insurance company favourite – but parts of the private debt market are also high on their priority lists.

A Goldman Sachs Asset Management survey of 328 representatives from insurance companies found that the highest proportion (44 percent) are looking to increase their allocations to private equity, followed by green or impact bonds at 42 percent. In the Americas and Asia-Pacific, support for private equity was strongest at 53 percent, while in Europe, the Middle East and Africa, the top choice was green or impact bonds at 59 percent.

Parts of the private debt market were also seen as attractive by the insurers surveyed, with 37 percent saying they were planning to increase their allocations to mid-market corporate loans over the next 12 months and 36 percent looking to do the same in infrastructure debt.

The insurers said they viewed rising inflation and tighter monetary policy as the biggest threats to their portfolios, while rising interest rates have displaced low yields as the primary investment risk.

abrdn ‘in the fairway’ for pensions
UK investment manager abrdn sees continued strong investor demand for senior real estate debt in its home market. Last week, it officially launched its Commercial Real Estate Debt fund II, with £205 million ($267 million; €245 million) already raised from public and corporate pension schemes in the UK. The vehicle is structured as a semi open-ended fund, with a fund-level return target understood to be between 4 and 6 percent. The company is targeting £1 billion of investor commitments to the fund.

Speaking to affiliate title Real Estate Capital Europe last week, Martin Barnewell, investment director in abrdn’s commercial real estate debt division, said the market opportunity is “square in the fairway” of where the business has always operated – senior, investment-grade lending. Barnewell added it is increasingly challenging for pension fund clients to make long-term investment decisions, meaning shorter-duration investments are attractive to them.


ACOFI becomes Sienna 
Sienna Private Credit is the new name for ACOFI Gestion, the French fund manager recently acquired by Sienna Investment Managers, the alternative investment platform of Belgian investment holding company Groupe Bruxelles Lambert.

ACOFI Gestion managed €2.5 billion in private debt at the end of last year on behalf of its European clients. Sienna Investment Managers, which has more than €30 billion in assets under management, has been on an acquisition spree, buying the likes of real estate manager L’Etoile Properties and long-only manager MH GA in addition to ACOFI Gestion.

Learn more about ABL facilities 
With their “popularity exploding”, according to Douglas Hollins, an associate at law firm Ropes & Gray, now seems the ideal time for a primer on the topic of asset-backed leverage facilities used by credit funds. And that’s precisely what Ropes & Gray has produced – well worth a listen here. Finance partner Patricia Lynch and counsel Patricia Teixeira also feature on the podcast, which explores the facilities’ benefits and unique features.

Cyndx launches new private markets product
Private markets deal origination firm Cyndx has launched its new Explorer product, which claims to allow investors to create custom queries that easily track and identify relevant information associated with their areas of interest. Jim McVeigh, founder and chief executive officer of Cyndx says speed and efficiency are crucial in deal sourcing, but even more important now than ever.

As private markets become more crowded, and competition increases, deciphering through the noise is increasingly crucial. Cyndx claims to be one of the emerging platforms to address this. The platform uses artificial intelligence and natural language processing.

LP Watch

Institution: Employees Retirement System of Texas
Headquarters: Austin, US
AUM: $36.1bn
Allocation to alternatives: 36.0%

Employees Retirement System of Texas has approved $75 million apiece to Benefit Street Partners Contingent Opportunities and Benefit Street Partners Special Situations Fund II, a spokesperson at the institution informed Private Debt Investor.

Benefit Street Partners is managing both funds; according to the SEC fillings it is understood that both the distressed credit vehicles were launched last year. The target sizes are yet to be disclosed by the fund manager.

ERS Texas currently allocates 0.7 percent of its investment portfolio to private debt investment, under the target allocation of 1.0 percent.

Recent fund commitments approved by the $36.1 billion pension fund have predominantly targeted North American distressed lending and senior debt vehicles across Europe.

Today’s letter was prepared by Andy Thomson with John Bakie and Robin Blumenthal.