Loan Note: ESG vital for returns, finds Coller; Italy is epicentre of NPL dealflow

ESG is no longer a 'nice to have', it's a crucial driver of performance, finds Coller Capital. Plus: Italy is the place to head to for NPLs and Manx enters debt management. Here's today's brief for our valued subscribers only.

They said it

“It is likely that interest rates are at a low point, and that the coming decade will see a rise in rates and inflation.”

Taken from a CIO Letter written by Thomas Friedberger, Tikehau IM chief executive officer and co-chief investment officer.

First look

ESG the returns driver
In an increasingly volatile environment for private equity, one way to preserve or enhance returns is to take environmental, social and governance issues seriously. That’s the message from secondary specialist Coller Capital’s latest Global Private Equity Barometer. The survey found that half of investors believe a strong ESG policy boosts returns.

“The fact that key ESG issues – climate, sustainability and health – are at the top of investor agendas – should surprise no one,” according to Jeremy Coller, chief investment officer of Coller Capital, “but the fact that half of all private equity investors think ESG investing will in itself boost their portfolio returns should be a wake-up call to anyone who still thinks ESG is a ‘nice to have’ or a PR tool.”

The survey also found that three-quarters of LPs will invest differently in response to issues connected with sustainability and climate change, while the same proportion intend to focus on new opportunities in the healthcare and biotech sectors.

All signs point to Italy for NPLs
You may not yet be able to head there on your summer holidays, but Italy is (or should be) the destination of choice for non-performing loan investors according to a new study by Negentropy Capital Partners, which has offices in Milan, London and Luxembourg.

The study describes Italy as “at the moment, the European country that offers the greatest investment opportunities” and “perhaps the last European market in need of… a high level of deleveraging”. The firm cites European Central Bank data in suggesting that NPLs across Europe could soon reach €1.4 trillion, which would be €200 billion higher than the previous peak of €1.2 trillion in 2015.

Italy has been by far the most active of Europe’s NPL markets with more than €38.9 billion of deals done to date compared with €11.7 billion in the second-most active market of Greece. Italy has €4.4 billion of current live deals going through the system.

Essentials

Manx enters debt management
The UK’s Manx Financial Group has entered the SME debt management market by obtaining regulatory permission to manage and collect debt on behalf of other companies through its Manx Collections subsidiary. The firm said its move coincided with a “ballooning” UK SME debt burden, with borrowing to survive the pandemic expected to reach more than £60 billion ($84.6 billion; €69.8 billion) net of repayments.

A&O launches women’s forum
Allen & Overy claims to be the first law firm to launch a networking and mentoring forum for aspiring women in the global institutional investor market.

The Institutional Investor Forum, which is part of the A&O Gender Equality Network, will offer a series of virtual and in-person events and networking opportunities for women based in financial centres across Africa, Asia, Europe, the Middle East and North America.

“Our vision is to create a platform for women to share knowledge, network and find mentoring opportunities,” comments lead partner for the Forum, MaameYaa Kwafo-Akoto.

Double hire for Monroe 
Chicago-based fund manager Monroe Capital has expanded its marketing and investor relations team with the addition of Sanjay Yodh as managing director and head of insurance solutions and distribution based in New York, and Adam Kennedy as director based in Los Angeles.

Prior to Monroe, Yodh was head of insurance solutions in North America at Aberdeen Standard Investments, while Kennedy was a regional vice-president at DWS where he was responsible for managing relationships on the West Coast.

LP watch

Institution: Los Angeles County Employees’ Retirement Association
Headquarters: Pasadena, US
AUM: $69.59 billion
Allocation to alternatives: 25.7%

Los Angeles County Employees’ Retirement Association agreed to increase its illiquid credit target allocation from 3 percent to 7 percent at its May 2021 investment board meeting, a contact at the pension confirmed to Private Debt Investor.

The US public pension also plans to add illiquid credit to its emerging manager programme by the end of 2022, as previously reported by Private Debt Investor.

LACERA currently allocates 2.6 percent of its full investment portfolio to illiquid credit, which includes private debt. The pension’s chief investment officer is Jonathan Grabel.


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

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