Loan Note: Liquidity offered by Muzinich and AllianzGI funds; how regulation is helping insurers

A new semi-liquid offering from Muzinich & Co makes use of AI. Plus: AllianzGI also opts for a semi-liquid approach; and AlphaReal identifies some helpful regulation. Here’s today’s brief for our valued subscribers only.

They said it

“Slow fundraising and limited market liquidity will stymie liquidity inflows, while strained portfolio companies will likely turn to their owners for cash”

Taken from a report titled Uneven Liquidity and Strained Valuations are Pushing Some Funds Towards Debt by S&P Global Ratings

First look

Futuristic risk management: Muzinich uses AI to assess default possibility (Source: Getty)

Muzinich fund uses AI to assess default risk

Fund manager Muzinich & Co has launched a new semi-liquid private debt strategy called MLoan, described as a “diversified, income-generating” strategy, mainly investing in private European bank loans.

Muzinich describes the strategy as “parallel lending”, whereby a fund manager co-lends alongside a bank with the bank remaining invested in the loan. Some of the strategy will also be allocated to syndicated bank loans and direct lending.

The fund is set up to capture an illiquidity premium while also allowing investors quarterly redemptions. An ‘evergreen’ strategy, it will be open to new subscriptions and redemptions on an ongoing basis.

Gianluca Oricchio, co-head of parallel lending and chief data scientist at Muzinich, described how artificial intelligence would be utilised: “The investment process is very robust as not only are all loans approved by a bank’s credit department but we perform our own qualitative analysis and then we use a proprietary AI/deep learning system that quantitatively analyses a company’s risk of default.”

He added: “Our machine learning system combines a vast data set of both financial and behavioural information that allows for more accurate risk management outcomes compared to the Basel III advanced methodology system.” The latter is used to assess banks’ credit risk.

Muzinich said the strategy would target high-growth medium-sized companies and would aim for a net return in the high single digits.

Cross-asset class fund for AllianzGI

Muzinich is not the only firm with a new semi liquid initiative: AllianzGI has launched a fund that will offer liquidity to those participating in a new fund investing across private markets.

Allianz Core Private Markets Fund is aiming to raise €3 billion to invest in private equity, corporate private debt and infrastructure. AllianzGI says the fund will allow investors to avoid “complex” capital calls.

The portfolio will be diversified across geographies, segments, vintage years and sectors and will seek to generate “mid-range single-digit” returns. As with the Muzinich offering, the fund will offer quarterly liquidity.

Emmanuel Deblanc, global head of private markets at AllianzGI, said the fund would be offered to the likes of high-net-worth individuals, wealth managers, pension funds and family offices.

Insurers laud regulation

The negative side of regulation has been in the headlines, with a collection of industry associations launching a lawsuit against the SEC’s proposed Private Fund Adviser rules.

But a new survey from real assets manager AlphaReal serves as a reminder that regulation can also be a good thing. The survey found that two-thirds of European life insurers believe legislative reforms including the Solvency II Directive will support bigger allocations to a wider range of secure income assets.

Nearly half of survey respondents (48 percent) said their organisation equated secure income assets with alternatives, while for 44 percent it was real estate and for 8 percent it was alternative credit.

Two-thirds of respondents (66 percent) said they would invest in AA-rated secure income instruments, 49 percent in A-rated, 26 percent in BBB-rated and 7 percent in BB-rated.

When asked about the impact of regulatory reforms on European life insurers’ investments in private markets, 88 percent said they were supportive and 12 percent said they had no bearing.


New York hire for Campbell Lutyens

Placement and advisory firm Campbell Lutyens has appointed Adam Smith as a managing director in its GP capital advisory practice, based in the firm’s New York office. The move is part of the growth of the GPCA practice globally.

Smith has more than 15 years’ experience in financial services, the majority in asset management advisory with a focus on M&A, IPOs and financing. He was previously a director at Barclays and, before that, spent more than seven years at Credit Suisse.

The GPCA practice was expanded in 2021 and has since offered specialist advice to general partners on strategic growth decisions regarding their management company and GP financing options, including minority GP stakes. It also advises fund managers on majority/control transactions.

The firm most recently advised Bridgepoint on its acquisition of New Jersey-based Energy Capital Partners and Meridiam on a minority GP stake from Samsung, as well as other firms in North America such as Blue Owl and Dextra Partners.

Invictus seeks ‘next level’ as Ade joins

Invictus Capital Partners, a Washington, DC-based alternative investment firm, has hired Chris Ade as senior managing director, head of business development and investor relations.

“Chris will play an instrumental role in taking our firm to the next level of growth. His vast experience, impressive background and well-developed network will help propel our company forward and position it for a strong future, fostering even stronger business relationships,” said Michael Warden, chief executive officer of Invictus.

Ade will be responsible for “communicating Invictus’ vision and values” with its investors and the financial community, according to a statement. He has more than 20 years’ experience and joins from Shenkman Capital, where he was senior vice-president. Prior to that, he held senior leadership positions at Lord Abbett, Piedmont Investment Advisors, Citadel and JPMorgan.

Invictus is an investment firm with a focus on opportunistic credit strategies. Founded in 2008, it is majority-owned by its employees and has experience across the spectrum of real estate debt investments, including high-yielding and distressed bonds and loans. From 2008 to 2014, Invictus was a joint venture partner and sub-adviser to The Carlyle Group for real estate debt strategies.

LP watch

Institution: The School Employees Retirement System of Ohio
Headquarters: Columbus, US
AUM: $17.41 billion
Allocation to private debt: 5.9%

The School Employees Retirement System of Ohio (SERS Ohio) has recently announced a commitment of $50 million to the Invesco Credit Partners Fund III during an investment meeting.

The Invesco Credit Partners Fund III is a distressed fund managed by Invesco. The vehicle primarily focuses on a variety of investments in North America within the corporate sector.

In addition to its involvement in private debt, Invesco also oversees global investments in areas including direct real estate, real estate securities (both equity and debt), infrastructure securities and master limited partnerships (MLPs).

SERS Ohio currently has an allocation of 5.9 percent of its investments in private debt, which is slightly higher than its target allocation of 5 percent.

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