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Loan Note: Oaktree makes progress with retail investors; CVI examines CEE prospects

Evidence grows of the importance of the retail investor channel to private debt. Plus: CVI takes a look at the impact of the war in Ukraine on businesses in the CEE region and Nuveen gets a pan-European real estate debt strategy underway. Here's today's brief for our valued subscribers only.

They said it

“As the macroeconomic environment continues to change and the syndicated markets remains volatile, we expect to see more interest in private credit than ever before”

Stephen Boyko, co-chair of private credit at law firm Proskauer, commenting on the release of the firm’s 2022 Private Credit Survey

First look

Further advances as private debt lures retail
The retail investor is still fresh in the minds of private credit firms. In our coverage this year we have brought you numerous examples of how private debt is doing its best to open up the retail investment channel (see here and here for examples). Two further developments this week help to underline the trend.

First came the announcement that Oaktree Capital Management‘s Oaktree Strategic Credit Fund has raised almost $300 million so far while courting investors able to make commitments as low as $2,500. The fund is being promoted by Brookfield Oaktree Wealth Solutions, which offers investment strategies managed by Brookfield Asset Management and Oaktree Capital Management. Brookfield acquired 62 percent of Oaktree in 2019.

The fund is structured as a non-listed business development company, has fundraising capacity of up to $5 billion and offers limited monthly and quarterly liquidity.

Second came Ares Management‘s announcement that it had hired Henry Lee to its Ares Wealth Management Solutions unit to help expand its retail efforts in Asia-Pacific. Lee, who joins as a partner in the firm’s Hong Kong office reporting to global AWMS head Raj Dhanda, had a 16-year career at HSBC, where he was global head of discretionary portfolio management and head of alternative investments for HSBC’s Global Private Bank.

Keeping faith in CEE’s fundamentals
The latest newsletter from Central Europe-focused private debt fund manager CVI provides interesting insights into how market conditions are perceived in that part of the world following Russia’s invasion of Ukraine.

The attack “wiped off the positive market expectations that were built up in 2021”, the newsletter says. “The current uncertainty is mainly driven by the wide array of the conflict’s potential scenarios.”

But despite “more difficult” business conditions in the foreseeable future, CVI points out that the business climate indicator for Central and Eastern Europe (source: GUS Statistics Poland) in March 2022 showed a relatively modest drop compared with that seen during the covid-19 outbreak. Croatia even recorded an uptick in sentiment – the only country in the region to do so.

The newsletter said the geopolitical situation was having an impact in Poland and the Czech Republic on a range of areas including interest rates, foreign exchange, labour and supply chain dynamics, availability of raw materials and energy prices. Cost inflation and interest rate hikes were expected to be among the most significant drags on SME performance going forward.

Reflecting on last year, CVI said it had seen strong activity compared with 2020 and said it continued to see strong fundamentals this year despite the market challenges. Indeed, in Q1 2022, the firm deployed €68 million in 12 new investments – compared with €33 million in 13 deals in the first quarter of 2021.

Essentials

A pan-European first for Nuveen
Nuveen Real Estate has launched its first pan-European real estate debt strategy with the €150 million first close of the fourth iteration of its European commercial real estate debt series. The previous three funds in the series have all been UK-focused.

The firm said that several German institutional investors had made commitments alongside Nuveen’s parent company TIAA at the first closing stage, with the fund aiming to eventually raise €500 million. The vehicle will focus on whole and mezzanine loans secured against European real estate.

Delancey hires Farinola from Brookfield
UK-focused real estate investor and adviser Delancey has appointed Martin Farinola as its head of real estate debt strategies. Delancey said Farinola would take a senior role in the investment advisory team and lead its real estate debt strategies with a view to broadening and growing the business.

Farinola has over 25 years’ experience in finance and real estate and joins from Brookfield, where he ran the European real estate debt business. He also held senior investment and debt roles at GAM, Goldman Sachs and BlackRock.

Signal’s commodities hire
London-based alternative investment firm Signal Capital Partners has hired Dave Gallagher as a managing director focusing on commodities structured lending.

With over 25 years’ experience in commodities, principal investing, derivatives and structuring, he joins from Morgan Stanley where he ran the commodities structured finance business. He also held roles at commodities trader Mercuria Energy, Goldman Sachs and Deutsche Bank.

LP watch

Institution: Maine Public Employees Retirement System
Headquarters: Augusta, US
AUM: $18.8 billion
Allocation to alternatives: 39.2%

Maine Public Employees Retirement System confirmed a $125 million commitment to Comvest Credit Partners VI, a contact at the pension informed Private Debt Investor.

Comvest Partner‘s latest fund launched in March of this year and is targeting $1.7 billion. The fund will focus on corporate opportunities in North America with senior debt returns. Its predecessor, Fund V, closed on $1.3 billion in April 2021.

MainePERS has a 5.1 percent allocation to alternative credits and a 7.9 percent allocation to traditional credit.

MainePERS’ recent private debt commitments have tended to focus on North American corporate vehicles.


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