Loan Note: Ares gives up carry for charity; Antares’ market survey

Ares carves out slice of fund's carry for charitable causes. Plus: an optimistic new study from Antares and DunPort gets backing for Irish SME fund. Here's today's brief for our valued subscribers only.

They said it

“All the achievements of the past five months, which I have pressed for years, have been exhilarating and gratifying… But the last weeks and months have been deeply trying for me and my family, too.”

Leon Black steps down as chief executive officer of Apollo Global Management two months after the firm said it was to focus more effort on governance and reputational risk. See our coverage here.

First look

Ares fund pledges 10% of carry to charity
“Definitely part of our team’s DNA and not a marketing ploy.” This was how Joel Holsinger, partner and co-head of Ares Alternative Credit, described the charitable donation Ares has pledged to make from carried interest profits arising from its Pathfinder fund, the final closing of which we reported on this week (see here).

The managers of the fund have pledged 10 percent of the carried interest to global health and education charities. Ares said it believes Pathfinder is the first institutional private investment vehicle to use a pre-defined structure to make such a substantial commitment to charity, and its managers are hoping to set a trend in the industry.

“We’re trying to embed a purpose into what we really enjoy doing every day,” said Keith Ashton, who works alongside Holsinger and is also a partner and co-head, adding that Ares is “hoping to inspire other managers to do likewise”.

The fund closed on its $3.7 billion hard-cap, nearly doubling its $2 billion target and attracted more than 80 investors, more than a third of which were new to the firm. The carried interest is 20 percent with a 6 percent preferred return, while the management fee is 1.25 percent. The target internal rate of return is 11-13 percent.

Antares study: confidence on the up
It’s a broadly optimistic picture painted by Antares Capital‘s latest Compass survey of the US mid-market, which combines insights from portfolio companies, private equity sponsors and investors. The report may be read in full here, but below are a few of the key highlights:

  • Confidence in the US economy and private markets is widespread, with predictions that they will be at pre-covid levels or higher for the remainder of this year.
  • Borrowers are concerned about new external business factors such as covid-related restrictions, lingering challenges to the supply chain and raw material cost increases, and are less focused on traditional industry headwinds and geopolitical risks.
  • The increased popularity of private debt is explained by resiliency, a higher yield premium and a desire to tilt toward floating-rate assets to hedge against inflationary risk.
  • Most sponsors and investors expect M&A activity to pick up in 2021, with the majority anticipating upticks in leveraged buyouts and add-ons this year compared with years prior.

Essentials

DunPort gets backing for Irish SME fund
Dublin-based manager DunPort Capital Management has received €50 million from the Ireland Strategic Investment Fund for a new vehicle that will offer financial support to covid-affected Irish SMEs. The fund will offer debt and hybrid capital solutions of between €3 million and €15 million to businesses with annual turnovers of between €5 million and €50 million. More details may be found here.

Still time to nominate Women of Influence
A reminder to keep the nominations coming in for our inaugural Women of Influence in Private Markets list. It will be published in a number of our titles, including Private Debt Investor, in July.

The list will feature individuals across private debt, private equity, infrastructure, real estate and venture capital. Let’s make sure private debt is well represented by getting submissions in here by the deadline of Tuesday 6 April.

Zames steps down at Cerberus
Matt Zames has apparently taken a lot of people by surprise with his decision to step down as president of US fund manager Cerberus Capital Management (see the Wall Street Journal‘s take on it here). Cerberus, a major player across private markets, closed a direct lending fund on more than $4.4 billion earlier this week – see here.

LP watch

Institution: State Universities Retirement System of Illinois
Headquarters: Champaign, US
AUM: $21.91 billion
Allocation to alternatives: 14.3%

State Universities Retirement System of Illinois confirmed the introduction of a standalone private credit asset class to its portfolio offering at its March 2021 board meeting, according to meeting minutes.

Highlights from SURS Illinois’ March 2021 board meeting:

  • Creation of private credit as its own asset class with a long-term target allocation of 5 percent. Introduction of this asset class comes at the expense of the pension reducing its target exposure to public credit.
  • $450 million-$550 million to be committed to the asset class annually, with individual commitments ranging from $50 million-$150 million.
  • Private credit commitments to diversify across strategy, collateral, vintage year, geography and manager.
  • A target of 20 percent of all new commitments will focus on emerging and minority, women and disadvantaged business enterprise managers.

Institution: Chicago Teachers’ Pension Fund
Headquarters: Chicago, US
AUM: $12.2 billion
Allocation to alternatives: 14.3%

Chicago Teachers’ Pension Fund agreed to commit $40 million to BIG Real Estate Fund II at its March 2021 Board of Trustees meeting, a contact person at the pension informed Private Debt Investor.

The US pension fund had previously committed $30 million to Fund I of the manager’s real estate debt series, which held a final close in May 2019 at $410 million.

CTPF’s recent private debt commitments have predominantly targeted North American corporate and real estate debt funds focusing on subordinated lending.


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

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