Loan Note: PDI awards 2020 up and running; why LPs are targeting securitised credit

It's time to vote in this year's annual PDI awards. Plus, investors are drawn to complex securitised credit and Setter releases its latest secondary rankings – with private debt set to join next year. Here's today's brief for our valued subscribers only.

She said it

“Despite ongoing coronavirus restrictions across most parts of Europe, we are witnessing a remarkable uptick in dealflows in the fourth quarter of 2020. We believe the market has bounced back strongly from the initial drop in volumes earlier in the year, potentially higher than the fourth quarter of 2019.”

Kirsten Bode, co-head of private debt, pan-Europe, at Muzinich & Co, commenting in an email distributed by the investment firm entitled ‘2021 could be a positive year for dealflows’.

First look

Time to make your opinions count
Looking back on a covid-ravaged year, perhaps the most remarkable thing was how much got done in spite of the pandemic. When we invited firms to submit their 2020 highlights to us, it was just like a normal year had passed – just as many complex deals, rapid fundraisings and strategic innovations. The only difference was that we received even more of these submissions than we had done in prior years.

The task of aggregating and then analysing this information, as well as digging into our archives and taking soundings from the market, was an arduous but ultimately rewarding one that allowed us to compile the 47 shortlists for our annual awards. The end result is that our poll is now up and running here. You have up to and including 8 January 2021 to register votes. Over to you.

Investors drawn to complexity 
Complex securitised credit strategies are on the holiday shopping list for many investors, according to new research from consultancy bfinance. It identified a whopping 185 different strategies included in this category, including 116 available in a pooled fund format.

Top of the list was collateralised loan obligations, which accounted for 37 percent of the average investor allocation to securitised credit, followed by mortgage-backed securities (25 percent) and commercial mortgage-backed securities (12 percent).

The strategies range from the aggressive (cash plus 5-10 percent target return) to the conservative (cash plus 1-2 percent). bfinance says the latter have become increasingly popular as an alternative to absolute return bond funds, which have been struggling to deliver positive returns net of fees.

Secondary rankings – private debt to join next year 
The secondary market volume report by Toronto-based investment bank Setter Capital is always a fascinating read, giving insights into the most popular managers and vintages among secondary buyers in alternative asset classes.

Now the firm has produced a “most sought after manager ranking” of the hottest funds in the market broken down by geography and strategy. The top three managers in Europe’s large leveraged buyout market, for example, are CVC Europe, Apax Europe and EQT (flagship LBO funds) – see here for more.

As yet, private debt does not feature in such rankings given the relative immaturity of the private debt secondary market. However, a spokesperson for the firm told Private Debt Investor it was their intention to include private debt as from next year.

Data snapshot

Values fall, but only a little. Research by the Alternative Credit Council has found the majority of loan portfolios saw only minor value adjustments during the height of the coronavirus pandemic. Most senior loans saw values adjusted downwards, but the vast majority adjusted down by less than 5 percent, whereas greater numbers of unitranche and second lien loans saw downward adjustments of up to 10 percent.

Essentials

New CFO for Metropolitan
Metropolitan Partners Group, the New York-based credit manager, has hired Ed Giordano as chief financial officer, replacing Eric Chasser who has taken on the new role of chief operating officer at the firm.

Giordano has more than 15 years’ experience in finance roles at credit funds prior to joining Metropolitan. He served as CFO for HIG Capital’s credit platform for six years, where he was responsible for the financial reporting and operations oversight of a $13 billion portfolio, and was managing director and chief accounting officer of Black Diamond Capital Management, where he was responsible for overseeing finance, accounting, tax and operational activities for BDCM and its affiliates.

Changes at CVC
CVC Credit Partners has announced two senior hires in the form of John Empson and Miguel Tony, who join from BlackRock and Park Square Capital, respectively. More can be read about the moves here.

LP watch

Institution: Pennsylvania Public School Employees’ Retirement System
Headquarters: Harrisburg, US
AUM: $58.70 billion
Allocation to alternatives: 35.9%

Pennsylvania Public School Employees’ Retirement System has agreed to commit $125 million to Sixth Street Specialty Lending Europe II, the pension’s December 2020 board resolution states.

The $58.70 billion US public pension has an 8.50 percent allocation to private debt.

The pension fund’s recent commitments are to vehicles focused on the corporate and infrastructure sectors within the Europe and North America regions.

Institution: Tennessee Consolidated Retirement System
Headquarters: Nashville, US
AUM: $53.56 billion
Allocation to alternatives: 16.4%

Tennessee Consolidated Retirement System has approved a $200 million commitment to Berkshire Multifamily Debt Fund III, L.P. at its December 2020 investment committee meeting, a contact at the pension informed PDI.

The pension’s recent private debt commitments have been primarily to North American vehicles focused on the corporate sector. TCRS allocates 16.4 percent of its full investment portfolio to alternative investments.


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

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