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Loan Note: Insights from our Fundraising Report 2020; ILPA aims to streamline due diligence

Our new downloadable fundraising presentation with all the key data from a tough year for those seeking private debt capital. Plus, how ILPA is aiming to steamline LP and GP due diligence, and Investcorp examines the current state of credit. Here's today's brief for our valued subscribers only.

They said it

“I strongly believe the new fund is a game changer in both the availability of non-dilutive growth capital in the region and for the fast distribution of tech products from the Middle East and globally.”

Ron Daniel, chief executive and founder of Israeli venture debt fund manager Liquidity Capital, on the launch of a new $100m fund in partnership with Dubai-based Vault Investments

First Look

Fundraising just got harder
With global private debt fundraising reaching its lowest level for six years, and the average fund taking longer to reach final close than at any time in the last decade, you wouldn’t think our downloadable 2020 fundraising presentation – see here – would make particularly happy reading.

However, if you were raising a senior debt fund last year then your chances of success were probably greater than for any other strategy. European funds were also favoured, as fundraising in that region closed the gap on North America. There’s no disguising it, though: the pandemic made gathering capital for private debt investment a tough slog.

ILPA’s model NDA
The Institutional Limited Partners Association has released a model non-disclosure agreement to streamline due diligence for LPs and GPs. The document aims to make legal negotiations more efficient, while cutting costs and the uncertainty of negotiation, ILPA chief Steve Nelson said in a statement.

It also addresses the issue of what constitutes confidential information by treating everything shared by a manager as such, with the exception of information that is or becomes generally public or that is already in possession of a signatory before the effective date of the NDA.

Investcorp’s view of credit 
A reasonably positive picture was painted in an inaugural credit outlook from Investcorp, the $32 billion credit manager. The firm’s view is that “credit fundamentals and loan market technicals remain strong in the US” and notes that European leveraged loans extended their nine-year record of positive annual returns in 2020.

However, the report also warns that European default rates will remain “relatively elevated” in 2021 and the “over-reliance” of European markets on Central Bank stimulus “poses significant medium-term risks as the support is eventually reduced or removed”.

Data snapshot

Breaking the billion-dollar barrier. The average size of senior debt funds leaped in 2020 as nervous investors took a flight to quality, according to figures from the PDI Fundraising Report 2020 (see above). While the average size of funds has crept up slowly in recent years, it increased to over $1 billion for the first time as big brands with strong track records were able to continue raising capital as overall fundraising dipped.


ESG-watch 1: Hunter brings in specialist 
Hunter Point Capital, the GP stakes firm launched in November last year, has appointed Jackie Roberts to spearhead the firm’s environmental, social and governance offering. Roberts will focus on providing value-added advisory services to Hunter Point’s partners, allowing them to grow and improve their ESG diligence and operations.

Roberts brings more than three decades of industry experience, most recently serving as a managing director and chief sustainability officer at The Carlyle Group. Prior to Carlyle in 2014, Roberts spent 17 years at the Environmental Defense Fund, one of the world’s leading environmental non-profit groups, where she was a senior director of the Idea Bank for the US Climate and Energy Program.

ESG-watch 2: ELFA draws up guidance for borrowers 
The European Leveraged Finance Association and the Principles for Responsible Investment have launched sector-specific guidance on environmental, social and governance disclosures for sub-investment grade corporate borrowers. The ESG Fact Sheets are designed to support borrowers in preparing ESG disclosure, and to facilitate engagement between investors and the companies to which they lend on important ESG topics. The ESG Fact Sheets can be downloaded from ELFA’s website.

LP Watch

Institution: San Francisco Employees’ Retirement System
Headquarters: San Francisco, US
AUM: $30.65bn
Allocation to alternatives: 39.50%

San Francisco Employees’ Retirement System has approved a commitment of $60 million to Kennedy Lewis Capital Partners II, according to the pension’s January 2021 meeting agenda.

The $30.65 billion US public pension has a 10.0 percent target allocation to private debt that currently stands at 5.1 percent.

The pension’s recent commitments have been to funds focused on the corporate sectors in Asia-Pacific, Europe and North America.

Institution: School Employees’ Retirement System of Ohio
Headquarters: Columbus, US
AUM: $14.98bn
Allocation to alternatives: 27.60%

School Employees’ Retirement System of Ohio has agreed to commit $100 million to Ares Private Credit Solutions II, a contact at the pension informed Private Debt Investor.

The $14.98 billion US public pension has a 5.0 percent target allocation to private debt that currently stands at 1.60 percent.

The pension fund’s recent commitments are to vehicles focused on the corporate sectors within the Asia-Pacific, Europe, Middle East/Africa and North America regions.

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

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