Loan Note: Hamilton Lane challenges valuation assumption; Golub adds to European team

Hamilton Lane tips private credit for strong performance and doesn't think private market assets are overvalued; BlackRock identifies leveraged loans as more vulnerable than high yield; plus, Golub ramps up in Europe. Here's today's brief for our valued subscribers only. 

They said it

“Smaller tech-focused banks are set for a very rocky ride as the loss of confidence widens, but… the risks of contagion to the wider banking sector remain limited”

Susannah Streeter, head of money and markets at UK financial services firm Hargreaves Lansdown, following the collapse at the end of last week of Silicon Valley Bank, which was taken over by US regulators

First look

Spying opportunity: private credit one of three areas identified by Hamilton Lane (Source: Getty)

Hamilton Lane: Credit one of three areas to watch
“Private credit returns have demonstrated historical consistency throughout all types of market environments,” according to data from Hamilton Lane, as referenced in the firm’s 2023 Market Overview. The report cites private credit, secondaries and infrastructure as the three biggest areas of opportunity in private markets.

According to the report, previous periods of rising interest rates have produced better yield – given the floating rate nature of many private debt loans – and the same is expected in this period. In addition, “banks have largely retreated from the sponsored lending business despite tremendous demand for debt from equity sponsors”.

The report says the first half of 2023 is expected to be challenging for markets in general but adds that private markets have repeatedly outperformed public markets in times of stress. Recent experience appears to bear this out. As of Q3 2022, Hamilton Lane says buyouts were outperforming the S&P 500 by nearly 2,050 basis points, while infrastructure and real estate were beating the FTSE All Equity REITs index by more than 3,400 basis points.

Hamilton Lane does not believe private markets assets are overvalued, contrary to popular belief. It says that, at the beginning of last year, valuation multiples for public and private equities converged, but that private market operating performance during last year was healthy, and outpaced listed assets. In addition, managers were exiting deals at a premium to their carrying value.

Leveraged loans ‘vulnerable’ but not distressed
The latest Global Credit Weekly from BlackRock highlights the “higher for longer” rate environment and raises the question of how quickly elevated debt costs will pressure corporate credit fundamentals.

The good news is on the high-yield bond side, which is entering this period in a position of “significant strength” due to what have been extremely low borrowing costs, solid fundamentals and low refinancing risk. The less good news is for the leveraged loan market, which is described as “more vulnerable as interest costs move in tandem with the policy rate”.

However, as yet there are few signs of stress/distress in either the high-yield or leveraged loan markets. Indeed, the leveraged loan distressed level in Europe appears to have decreased in recent months due to “the fading of left-tail risks” including that of natural gas rationing.

BlackRock says its preference in the current environment is for floating rate and short-duration exposure “to take advantage of the inverted yield curve”.


Triple Europe hire for Golub
Chicago-based fund manager Golub Capital has announced three new additions to its London-based team.

Daniel von Rothenburg joins as a managing director and head of EMEA on the business development and investor relations team, having previously been a managing director at New End and Oaktree Capital.

Philipp Schroeder becomes a senior director and Mensah Lambie a principal on the direct lending team. Both were previously at Apollo Global Management in London, Schroder in the direct originations team and Lambie as a principal.

Golub first established a dedicated direct lending presence in Europe in 2020 under the leadership of Tara Moore, managing director & head of European originations. In the last three years, the firm says it has made nearly $9 billion of financing commitments to European deals across more than 80 transactions.

Tan new Asia Pacific CEO at Muzinich
Global fund manager Muzinich & Co has promoted Andrew Tan to chief executive officer, Asia-Pacific.

Tan has more than 20 years’ industry experience and has worked across sourcing, structuring, execution, risk taking and distribution roles in the public and private credit markets in the Asia-Pacific region.

Tan joined Muzinich in 2020 as managing director, head of Asia-Pacific private debt, and led the launch of the strategy, its investments and capital-raising efforts.

“Andrew’s deep knowledge of credit markets, combined with considerable expertise in business development, makes him well placed to drive the firm’s strategic expansion in the region, and I look forward to working with him in the years ahead,” said Justin Muzinich, chief executive officer of Muzinich.

Along with his new responsibilities, Tan will continue to be lead portfolio manager and investment committee member for the Muzinich Asia-Pacific private debt strategy.

Debt specialist steps up at Apax
Private equity firm Apax Partners has appointed Annick Bitoun as partner for debt capital markets in Paris, becoming the 16th partner in the Apax team.

Bitoun works alongside the chief financial officers of Apax’s portfolio companies on all aspects relating to financing, cash management and financial optimisation. She covers all sectors and is also responsible for the firm’s own financing arrangements.

She expanded her team a few months ago by bringing in a debt manager, responsible for financing new deals and external growth opportunities on behalf of portfolio companies.

Bitoun began her career as a director in the leveraged finance department at Crédit Agricole CIB. She then joined part of the French judicial system during the financial crisis in 2007, where she was responsible for restructuring listed and unlisted struggling companies.

She joined Apax as a debt manager in 2014.

LP watch

Institution: Indiana Public Retirement System
Headquarters: Indianapolis, US
AUM: $46.34 billion
Allocation to alternatives: 27%

Indiana Public Retirement System has recently expanded an existing separately managed account with HPS Investment Partners.

INPRS committed $250 million to INPRS/HPS Brickyard Direct Lending SMA, according to materials from the pension system’s February investment meeting. The fund will provide speciality direct and senior loans to upper mid-market private companies.

INPRS had previously committed $200 million to the 2018-vintage separate vehicle. The public pension allocates 4.5 percent of its portfolio to private credit, amounting to $2.08 billion in capital.

Today’s letter was prepared by Andy Thomson with John Bakie, Christopher Faille and Robin Blumenthal