Loan Note: Asia-Pacific on the up; emerging managers fight for attention

Why investor interest in Asia-Pacific private debt is growing. Plus, the emerging managers finding it hard to grab attention and signs of a recovery in European deals. Here's today's brief for our valued subscribers only.

He said it

“There’s a scarcity of capital, so the folks who are providing debt to the market have been able to get relatively decent terms and that’s where you’re seeing capital move in the hotel space.”

Christopher Diffley, managing director of RockBridge Capital, an Ohio-based hospitality lending specialist, reflecting on the Colony Capital/Highgate Hotels deal (see more here).

First look

Reasons for hope in Asia-Pacific
Private debt fundraising has taken a major hit from the pandemic, right? Well, certainly if your fundraising parameters are the US and Western Europe. But in Asia-Pacific, not so much. In fact, vehicles focused on the region raised as much in the first three quarters of this year as in the whole of 2019.

What’s more, the outlook looks even rosier in the period ahead. As David Fowler, country head of Singapore at alternative asset services firm Sanne, told us: “The larger institutional managers will be increasing fundraising into 2021 and we also see some smaller funds starting to become more attractive as we move towards the end of this year.”

One of the reasons for the increased interest is that, having previously been associated almost entirely with distressed and special situations, Asia-Pacific is now seeing increased appetite for debt from growth companies. These businesses are turning to private debt as the banks fail to meet their needs.

You can read more about this and a host of other trends in our newly published Asia-Pacific Report (see here).

Brand name better than brand new? 
Has fundraising become too predictable? One of the talking points at last week’s Women in Private Equity Forum was LPs’ ‘flight to safety’ post-pandemic as commitments gravitated to the big brand names that investors already had established relationships with. The point was made that this could be a threat both to the fundraising prospects of smaller, emerging managers and also to the diversity of LP portfolios.

However, that may not be the whole story. Newer funds are building trust with investors by getting them involved in co-investments and an increasing number of LPs are now understood to be considering rewriting protocols that prevent them from committing capital to managers they have not met in person. Read more about it here.

Data snapshot

Deals on the rebound. Investment bank GCA Altium recorded a recovery in European unitranche deals in the third quarter of 2020 after a difficult second quarter amid tight restrictions to curb coronavirus. Deal numbers dropped by almost a third from 61 in Q1 to just 43 in Q2 but saw a partial recovery to 53 in the three months to the end of September.

Essentials

New CEO for DFG
DFG Investment Advisers, a $7.2 billion alternative credit investment manager, has appointed Rehan Virani as chief executive officer. Virani will oversee management of the firm, spearhead strategic fundraising initiatives and develop tailored investment solutions in structured and corporate credit. Virani was most recently head of business development for private debt for the Americas and Asia at Partners Group.

In addition, New York-based DFG is expanding its leadership team with the promotions of Kashyap Arora to co-chief investment officer, Selma Cilka to co-chief risk officer and Alex Nerguizian to co-head of business development. The three have been with the business for more than a decade.

CLO issuance from Audax
Audax Private Debt has priced its fourth collateralised loan obligation at $338.7 million, with Bank of America having acted as arranger and sole bookrunner. Formed in 2007, Audax has invested $21 billion in sponsored, mid-market deals. Audax Private Debt is the private debt arm of Audax Group, which also invests in private equity.

Research effort bolstered at PGIM 
PGIM Real Estate has appointed Henri Vuong as executive director and head of real estate debt investment research in its global investment research team, based in London. PGIM Real Estate is the real estate investment and financing business of PGIM, the $1.4 trillion global investment management business of Prudential Financial.

In the newly created role, Vuong will develop and lead debt research across real estate markets and support the portfolio, asset management, acquisitions and marketing efforts of the regional businesses.

LP watch

Institution: Houston Firefighters’ Relief and Retirement Fund
Headquarters: Houston, US
AUM: $4.26 billion
Allocation to alternatives: 27%

Houston Firefighters’ Relief and Retirement Fund has confirmed a $25 million commitment to Torchlight Debt Opportunity Fund VII, according to the pension’s October 2020 board investment meeting.

The pension allocates 27 percent of its full investment portfolio to alternative assets. Its recent private debt commitments have been primarily to North American vehicles focused on the real estate and corporate sector.

Institution: New Hampshire Retirement System
Headquarters: Concord, US
AUM: $9.4 billion
Allocation to alternatives: 29%

New Hampshire Retirement System has approved a $50 million commitment to CVI Credit Value Fund V, as mentioned during the institution’s October 2020 investment committee meeting.

The commitment is a re-up with one of the pension’s existing managers, CarVal Investors. NHRS has made previous commitments to CVI Credit Value Fund IV and CVI Credit Value Fund III.

The pension’s recent commitments have been to senior and distressed debt vehicles. All recent commitments have been in the corporate sector.


Today’s letter was prepared by Andy Thomson with John BakieRobin Blumenthal and Adalla Kim.

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