They said it
“Activity in H1 ’23 has been resilient and while in terms of volume we are not seeing the record levels compared to the same period last year, they are still roughly around pre-pandemic levels”
Lucy Stapleton, head of deals at PwC UK, commenting on activity in the UK market as part of the firm’s Global M&A Industry Trends report for H1 2023
First look
Borrowers pre-empting maturity walls
Lenders are seeing opportunity to make loans at attractive rates as borrowers “bite the bullet” prior to hitting maturity walls, according to the latest Varde Views Credit Market Update from fund manager Varde Partners.
For the last 12 months borrowers have “delayed the inevitable”, according to the report, but are now finally accepting the need for more expensive credit in advance of hard refinancing deadlines. They are hoping that any new finance will provide a bridge to more favourable market conditions.
Varde says that in certain geographies it has seen both corporate and sponsor asset owners “forced to sell assets cheap and/or in off-market transactions to meet upcoming maturities”. Some of this selling is taking place in secondary markets where both banks and non-bank lenders are selling portfolios of assets “to free up capital and/or to generate liquidity”.
The firm also sees signs of a fundamental distress opportunity, even though at present its focus is largely on performing credit. This is due to “growing stress in the market as well as looming threats on the horizon”. It says it expects fundamental distress to become “more compelling with time and a larger portion of our private market pipeline”.
Second close for Ares Core Fund on $3.45bn
Ares Management held a second close on its Pathfinder Core Fund on $3.45 billion, according to a regulatory filing with the Securities and Exchange Commission. Of the incentive fee for this fund, 5 percent will be donated to charitable causes.
Ares launched the perpetual life fund in July 2021. According to the filing, the $3.45 billion is an aggregate number that includes Pathfinder’s onshore and offshore funds, although it does not include the commitment of the general partner, APC Management.
A spokesperson for Ares declined to comment on the filing and the second close for Pathfinder Core.
The fund has a senior debt strategy, focused on North American corporates. According to PDI research, it has several public pension funds among its limited partners. Commitments range from $250 million from the Tennessee Consolidated Retirement System, to the comparatively modest $25 million from the San Francisco Employees’ Retirement System.
The most recent commitment came from Arizona: $100 million from the City of Phoenix Employees’ Retirement System in April 2023.
Los Angeles-based Ares, an alternative investment firm established in 1997, has total AUM of $360 billion, according to PDI research.
GPs sign up to wealth management platform
Some big names have signed up to Madrid-based investment bank Allfunds’ new B2B WealthTech platform for the funds industry.
Apollo Global Management, Blackstone, Carlyle, Franklin Templeton and Morgan Stanley Investment Management have all been named as initial participants in the Allfunds Private Partners programme, which aims to provide solutions to make alternative funds more accessible to distributors.
Allfunds says the initiative – part of a new department called Allfunds Alternative Solutions launched earlier this year – was triggered by increasing demand from distributors globally, especially from the wealth management segment, to invest in alternative assets.
The firm says its technology will streamline operational aspects of private assets investments, making access to alternatives funds as straightforward as access to more conventional funds.
Veronique Fournier, managing director and head of EMEA Global Wealth at Apollo, described Allfunds’ distribution network as “a pioneering programme supporting seamless access and education, as we continue to develop and deliver semi-liquid products purpose-designed for global wealth investors”.
Essentials
New private wealth head for Carlyle
Carlyle has appointed Shane Clifford as head of private wealth strategy.
Clifford has over 20 years’ experience in various alternative assets and financial services business development and strategy positions, including roles at Legg Mason (EnTrustPermal), BlackRock and Merrill Lynch.
He joins from Franklin Templeton, where he was responsible for growing the alternative strategies segment and managing the product development and retail distribution strategy.
In the newly created role, Clifford will be responsible for growing Carlyle’s private wealth business across three global business segments as the firm looks to expand its existing capabilities. He will lead the team in identifying new investor segments, new products and capital raising opportunities to appeal to private wealth investors globally.
“We believe there is tremendous long-term opportunity for Carlyle to grow our footprint in this space given the strength of our brand and our diversified global platform,” said Carlyle head of global credit, Mark Jenkins.
Investors want ‘dramatic’ illiquids boost
Research from Aeon Investments, the London-based credit-focused investment firm, finds just over a quarter of investors (26 percent) will dramatically increase allocations to illiquid assets, while 59 percent will increase allocations slightly.
Just 12 percent of respondents say they will keep allocations the same and 3 percent plan to decrease their level of investment in illiquid investments. The primary motivation for investing in illiquid markets is the need for protection from macro uncertainty. More than half (52 percent) say this is the main reason for choosing private debt investments, which have strategies that offer a floating rate coupon, offering the potential for a natural hedge against inflation.
More than a quarter (29 percent) say the most important feature of private debt assets is diversification benefits. One in 10 respondents identified the expanding range of assets offered within private debt strategies as the key motivation for investing. The same number say the increased focus on ESG in private debt is the most important reason behind more professional investors increasing their allocation to the asset class.
The research covered pension funds, insurance asset managers, family offices and wealth managers, which collectively manage around $545 billion in assets.
Double hire for Precede
Precede Capital Partners, the London-based real estate development lending platform, has expanded its credit team through the appointments of Michael Berditchewsky as associate director and Lukas Kielius as associate. They will report to David Jerrard, chief credit officer.
Berditchewsky joins from LaSalle Investment Management, where he was most recently vice-president in the debt investments team and was involved in the origination, underwriting and execution of whole, junior and development loans. Prior to LaSalle, he worked for pan-European investment and asset manager Aerium.
Kielius joins from CBRE Investment Management, where he worked as a senior investment analyst, EMEA Credit Strategies, helping oversee senior and whole loan credit strategies and working across deal origination, underwriting and execution from financing assets through to stabilisation. Prior to CBRE, he was part of the Real Estate Debt Finance team at HSBC.
Since launching in March 2021, Precede has originated and arranged loans totalling almost £1.7 billion ($2.2 billion; €2 billion).
LP watch
Institution: Government Employees Pension Service
Headquarters: Jeju-do, South Korea
AUM: 6.28 trillion won
Allocation to alternatives: 34.91%
Government Employees Pension Service has issued a request for proposal from global real estate debt fund managers.
The firm aims to commit $35 million to two managers, whose funds should allocate at least 80 percent to North America and/or Europe. Funds that allocate to a single sector, as well as distressed funds and funds with 50 percent or more allocated to mortgage-backed securities, will be excluded.
The funds will have a target size of at least $500 million at final close, and the firms should have run their business for least five full years. The fund manager should have at least $10 billion in private debt AUM, of which $5 billion is in a real estate debt strategy.
The 6.28 trillion won ($4.7 billion, €4.3 billion) South Korean government employees pension has a 34.91 percent allocation to alternative investments.
Platinum subscribers may click here for the investor’s full profile, including key contacts, allocation strategy and fund investments.
Today’s letter was prepared by Andy Thomson with John Bakie, Christopher Faille and Robin Blumenthal contributing
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