Loan Note: Manager searches for private debt soaring; Canada’s alternative assets gap

Bfinance notes strong client demand for private debt. Plus: Canada playing catch-up on alternatives allocations; and Vivriti claims first-of-a-kind fund in India. Here's today's brief for our valued subscribers only. 

They said it

“New LBO activity remains constrained by valuation expectation gaps between sellers of businesses and financial sponsor buyers” 

From Fitch Ratings’ latest European Leveraged Finance Chart Book for the first quarter of this year

First look

Search is on for private markets – especially debt
“The king of new private market manager search activity.” That’s how consultancy Bfinance described private debt following the firm’s latest calculation of how many times clients are searching for particular types of manager.

Private debt accounted for 35 percent of all searches for private market managers in the year to March, with private equity representing 23 percent and real estate falling to 15 percent from 26 percent a year earlier.

Private markets as a whole are dominating new manager search activity, accounting for almost 60 percent of all new mandates from Bfinance clients in the 12 months to March. “Throughout the last 12 months, client demand for private market strategies has remained very high – despite the ‘denominator effect’ – although appetite for real estate declined from mid-2022 onwards,” said Kathryn Saklatvala, head of investment content at Bfinance.

Bfinance found equities managers back in favour, with the number of searches in the first quarter equalling the three previous quarters combined. There was a strong preference for developed market managers over emerging markets, with the former’s share rising from 65 percent to 76 percent.

Alternatives on the sidelines in Canada
Canada is a market where some sophisticated investors are piling into alternatives, including private debt, but, on the whole, allocations are well short of where they could be.

Perhaps the most prominent of the sophisticated investors is CPP Investments, which has increased its exposure to alternatives by 25 percent in the past year and more than 770 percent in the last decade according to a white paper from Toronto-based asset manager Ninepoint Partners. At the end of last year, CPP had $44.4 billion invested in private debt.

However, the white paper points out that, while more than 30 percent of investors globally have alternative assets in their portfolios, the figure for Canada is “significantly lower”. Moreover, according to the Alternative Investment Management Association, the average Canadian wealth adviser has an alternatives allocation of just 4 percent, of which private debt is only a subset.

This is at a time when, according to Ninepoint, there is an opportunity for private debt to flourish in Canada. It said the high inflation and interest rate environment has created a liquidity crunch in the highly regulated Canadian credit market. Private debt funds have a healthy pipeline of deals, it said, including those involving borrowers that have traditionally been financed by banks.

Stress, not distress
Savills, at its 35th annual Financing Property event in London on Wednesday, presented a mixed picture of debt market conditions, according to our colleagues at Real Estate Capital Europe.

Nick Harris, head of UK and cross-border valuations at the real estate consultancy, said there is clearly stress in the loans market, but not significant distress for now. “We are in the early days of how lenders will deal with stretched capital structures.”

In some cases, the cost of financing is more expensive than the entry yield, Harris said. However, he added that price discovery for prime assets is relatively far advanced, in the UK more so than in continental Europe. By contrast, price discovery for non-prime assets remains a work in progress, he said. Overall, prices have corrected faster than in previous downturns.

Borrowers have also been quick to act. He pointed to Bayes Business School figures that showed around 65 percent of lending last year was in refinancing deals, of which around half were with new lenders. Keep an eye out for further coverage of the event on

Due to the UK holiday on Monday 29 May, the next edition of Loan Note will be published on Thursday 1 June. 


LGIM replaces departed European infra debt chief
John Carey has been appointed LGIM’s new head of infrastructure debt in Europe, according to our colleagues at Infrastructure Investor. He will lead a six-person team managing £3.6 billion of AUM in the UK and Europe.

Carey leaves a position as executive director for debt investments at IFM Investors, reporting to Calum Macphail, head of private credit investment, Europe.

LGIM’s previous head of infrastructure debt, Europe, was Will Devenney, who left at the end of 2022 and resurfaced earlier this year as managing partner of Canada-based Power Sustainable’s newly launched European Infrastructure Credit platform.

LGIM’s ambition is “to bring in new investment opportunities for clients, including pension funds, insurance companies and consultants”, according to a statement. As infra debt is enjoying a comparatively smooth ride through the headwinds facing large parts of the private markets, this could pay off.

The competition for European infra debt shows no sign of letting up.

India’s Vivriti launches securitisation fund
Chennai-based Vivriti Asset Management said its Vivriti India Retail Asset Fund is a first-of-a-kind asset-backed securitisation fund in India.

The International Finance Corporation has invested $30 million in VIRAF, which is managed by Vivriti Asset Management and backed by a capital commitment of $75 million from M&G Catalyst, a global private assets strategy within international investment manager M&G Investments.

The fund will focus on scaled investment in securitised debt securities with micro and small enterprise-backed assets – predominantly microloans to MSEs, which will constitute about 90 percent of the portfolio.

VIRAF has a term of 10 years, with target assets under management of $250 million and is domiciled in the Gujarat International Finance Tec-City. It is hoped that IFC’s and M&G Catalyst’s participation will attract other investors.

“Our research indicates that Indian ABS has outperformed internationally better-rated ABS, which makes Indian ABS a compelling opportunity for global investors. M&G and IFC’s participation serves as a validation of the huge and untapped potential of Indian ABS as an asset class, the stability of the regulatory environment, and India’s positive macro-outlook,” said Vineet Sukumar, founder and managing director of VAM.

LP watch

Institution: New York State Teachers’ Retirement System
Headquarters: Albany, US
AUM: $128.4 billion
Allocation to private debt: 7.5%

New York State Teacher’s Retirement System approved a new private debt commitment of $150 million to the Artemis Debt Separate Account.

The separate account by Artemis Real Estate Partners targets mezzanine loans and first mortgage loans in the US.

NYSTRS has a current allocation of 7.5 percent to private debt, which is under the target allocation of 8 percent. The $128.4 billion pension fund’s recent private debt commitments have typically targeted North American vehicles pursuing either senior or subordinated and mezzanine debt.

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