Loan Note: Mubadala teams up with Barings; IFC refocuses on Asia distressed

Mubadala joins forces with Barings to add a second private credit platform. Plus, the IFC weighs into Asian distress and investor fears over a global economic slowdown. Here's today's brief for our valued subscribers only.

They said it

“Covid-19 has been a stress test for our asset class, and while the story is not fully written yet, it appears that middle-market private debt will perform well.”

David Brackett, chief executive officer of US fund manager Antares Capital, which has closed its inaugural Senior Loan Fund on $3bn (see here).

First Look

Sovereign wealth arrives in private debt 

After Mubadala came the Qatar Investment Authority and after the QIA came er… Mubadala again.

The Abu Dhabi giant was responsible for the first and third major private credit/sovereign wealth fund partnerships announced over the last few months – this $12 billion arrangement with Apollo Global Management followed by a tie-up with Barings that will aim to invest $3.5 billion over the next 18 months in the European mid-market.

Tom Finke, Barings chairman and chief executive officer, said the platform would focus on senior secured loans “as borrowers shift focus from traditional bank financing to institutional capital providers to fund acquisitions and growth projects”.

In between the Mubadala announcements came this one between QIA and Credit Suisse Asset Management. For SWFs, which have up to now not tended to have large exposures to the asset class, private debt is now very much in vogue.

IFC refocuses on distressed investing

International Finance Corporation, a member of the World Bank group, is refocusing on distressed investing across Asia via its Distressed Asset Recovery Platform programme.

IFC’s DARP is a global platform focusing on the acquisition and resolution of distressed assets across emerging markets. It is sized at $7.4 billion, of which $4.8 billion comes from IFC’s co-investors.

Notably, DARP has several active platforms with managers including ADM CapitalClearwater Capital Partners (part of Canada’s Fiera Capital since 2018), and Altus Capital, a Manila-headquartered alternative investment firm.

The latest investment is with Collectius, a debt collection and receivables acquisition company headquartered in Singapore.

Read more about it here.

Data snapshot

It’s the economy, stupid. Investors are now acutely concerned about the investment impact of a global economic slowdown amid falling confidence levels, with many now turning to private assets to manage risk and diversify their portfolios, the Schroders Institutional Investor Study 2020 has found.

The study – which spanned 650 institutional investors globally encompassing $25.9 trillion in assets – revealed that the vast majority of investors (79 percent) believed a global economic slowdown would have the biggest impact on their portfolio performance over the next 12 months.

Essentials

LPs: your perspectives please!

In its ninth year, Perspectives is our annual study of how institutional investors will approach private debt and other private markets over the coming year. If you are an institutional investor, your participation in the study is greatly appreciated. Click here to participate.

It takes less than 10 minutes and in return you will get a complimentary copy of the full results. A $5 donation to UNICEF will be made for every completed set of responses, with your answers remaining strictly anonymous. For any questions, please email Nicole Douglas, head of investor research: nicole.d@peimedia.com.

Mackenzie and Great-West acquire stake in Northleaf

Mackenzie Financial Corporation and Great-West Lifeco have taken a non-controlling interest in Toronto-based fund manager Northleaf Capital Partners, which specialises in private equity, private credit and infrastructure (see announcement here).

A statement released by the firms involved says the deal will enhance the product suite of investment management firm Mackenzie and insurer Great-West Lifeco, while also accelerating Northleaf’s growth and distribution reach.

LP Watch

Institution: Iowa Public Employees’ Retirement System
Headquarters: Des Moines, US
AUM: $35.4bn
Allocation to alternatives: 22.69%

Iowa Public Employees’ Retirement System has hiked its private debt target allocation from 3 percent to 8 percent, according to minutes from the pension’s September 2020 investment board meeting.

IPERS’ investment board has approved a plan to strategically boost its target allocation across all its private markets assets in order to pursue higher returns than are predicted under its current set of target allocations.

The $35.4 billion US public pension has also increased its target allocation to private equity from 11 percent to 13 percent; and private real assets (comprising private real estate, infrastructure and agriculture) from 7.5 percent to 8.5 percent.

The pension currently allocates 3.01 percent of its investment portfolio to private debt.

Institution: State Universities Retirement System of Illinois
Headquarters: Champaign, US
AUM: $20.45bn
Allocation to alternatives: 14.4%

State Universities Retirement System of Illinois has hired Meketa as the first investment consultant for its newly formed private credit sub-asset class, according to the pension’s website.

An initial RFP for a private credit advisor was issued by SURS in June 2020. Procurement criteria included requiring prospective consultants to provide assistance with portfolio construction, pacing and evaluation; as well as providing assistance with the securing of direct private credit fund commitments.

Private credit will be within the pension’s wider credit fixed income portfolio, which comprised 14 percent of SURS’ $17.79 billion total AUM as of 31 March 2020.

The target allocation for private credit has been set at 5 percent, with emerging market debt and progress credit the other sub-asset classes sitting alongside private credit within the credit fixed income portfolio. SURS’ AUM as of 31 August 2020 was $20.45 billion, meaning the pension’s maximum private credit allocation could total $1.02 billion.

SURS has exposure to private credit through previous real estate debt commitments made to Dune Real Estate Partners through funds III and IV of its flagship series.


Today’s letter was prepared by Andy Thomson with John BakieRobin Blumenthal and Adalla Kim.

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