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Loan Note: New investors lured to private debt; peer-to peer lenders in bullish mood

How private debt is opening up to new investors. Plus, promising signs in the peer-to-peer market and a new strategic partnership launched for CLOs. Here's today's brief for our valued subscribers only.

They said it

“The health in which private credit markets find themselves after a year like this is, quite simply, phenomenal, both in terms of the health of individual companies and the returns the asset class has produced.”

Trevor Clark, founder and managing partner of US fund manager Twin Brook Capital Partners, quoted in the cover story of our Mid-Market Lending Report

First look

Building a bigger tent
The democratisation of private debt is gathering pace, as demonstrated by two initiatives we reported on last week. First, Paris-based fund manager Tikehau Capital, in partnership with French insurer MACSF Group, launched a private debt product for individual investors (see here).

Tikehau Financial Enterprises is an evergreen vehicle backing loans to unlisted companies that will offer liquidity to private pension savers in France. It is seen as a way to link ordinary savings with the real economy.

Meanwhile, fund managers MV Credit and Loomis Sayles launched a private debt solution specifically for the UK’s defined contribution pension funds (see here). Such funds have expressed strong interest in private debt but have to overcome strict restrictions on their investing activities.

The advance of the peer-to-peers
Peer-to-peer lenders, rather like mainstream private debt firms, had long been aware that they would be judged not on how they performed in the good times but when the economic environment became choppy.

Some of the early signs are encouraging. In late March, the Financial Times reported in this article (paywall) that the UK’s largest peer-to-peer lender, Funding Circle – which had seen its post-IPO share price tumble – was reporting pre-tax profits for the first time as its portfolio performed solidly through the pandemic.

There’s another indicator of how positively peer-to-peer lenders are viewed – namely, who is prepared to join them. Last week, Novicap, a London-based online invoice finance platform, announced that Lois Duhourcau had joined as chief financial officer – see here. Duhourcau was a director at big-hitting alternative assets firm The Carlyle Group, where he was a key figure in the build-out of that firm’s $5 billion credit opportunities team.

York, Kennedy Lewis form CLO partnership 
A major new partnership in the collateralised loan obligation world as fund managers York Capital Management and Kennedy Lewis Investment Management join forces to form a new platform called Generate Advisors.

The deal sees York’s $4 billion CLO business and team transfer to Generate to continue managing the current and any future CLOs. Kennedy Lewis is investing in Generate and has also committed to invest at least $200 million in the equity of Generate’s future CLOs.

“The opportunity to support and scale a top CLO manager has been a goal of Kennedy Lewis’ growing credit platform since its early days,” said David Chene, co-founder of Kennedy Lewis.


Muzinich posts third close on latest fund
New York-headquartered fund manager Muzinich & Co has announced the third close of its Muzinich Pan-European II Private Debt Fund at €342 million. The fund provides growth capital to lower mid-market companies to finance acquisitions, expansions and transitions in family and founder-owned businesses. It follows the €706.5 million closing of the firm’s first Pan-European Private Debt Fund in 2018.

Schroders swoops for Australian real estate lender
Global investment manager Schroders has acquired a 50.1 percent stake in RF Eclipse, a Sydney-based alternative lender to the small to medium-sized end of the real estate market. Formed in 1999, RF Eclipse specialises in investment, development and construction financing across residential, commercial, retail and industrial properties. Following completion of the deal, the business will be known as Schroder RF.

LP Watch

Institution: Oklahoma Police Pension and Retirement System
Headquarters: Oklahoma City, US
AUM: $3.03bn
Allocation to alternatives: 21.8%

Oklahoma Police Pension and Retirement System agreed to retain Asset Consulting Group to provide investment consulting services at its March 2021 retirement board meeting, a contact at the pension informed Private Debt Investor.

Asset Consulting Group provides a range of services, including investment performance reporting and monitoring, portfolio rebalancing and asset allocation.

OPPRS currently allocates approximately 1.5 percent of its investment portfolio to private debt. The pension’s executive director is Ginger Sigler.

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