Loan Note: View our latest PDI 200 and GI 50 rankings; Europe deal mood upbeat

Five investors share their thoughts on key themes, and we present our PDI 200 and GI 50 rankings of the world's biggest fundraisers and LPs in private debt. Plus: further evidence of deal recovery in Europe; and Christian Faes's new real estate bridging finance fund. Here’s today’s brief for our valued subscribers only.

They said it

“Private debt continues to be the main private market asset class that has performed relatively well, benefiting from the higher yields available to lenders”

Taken from consultancy Bfinance’s Manager Intelligence and Market Trends quarterly report for Q3 2023

First look

PDI Dec 2023 cover

If nothing else, take a look at this

We have a feast of content we’d like to draw your attention to (if you haven’t devoured it already, of course). First up is our in-depth conversation with five leading investors in private debt as we seek their views on a variety of topics including reflections on the year gone by, predictions for what lies ahead and what more private debt needs to do to rise to ESG and DE&I challenges.

Then there are our two big annual rankings: the PDI 200, which ranks private debt’s top fundraisers over a five-year period and has doubled in size this year; and the Global Investor 50, which reveals the leading limited partner supporters of the asset class. We also have an interview with Jason Proctor on how Troviq is assisting the democratisation of private debt.

Second survey confirms Europe deal uptick

In Loan Note on Monday, we reported on the latest MidCapMonitor from Houlihan Lokey, which pointed to a recovery in the European private debt deal market. This is a view given further emphasis by Deloitte’s latest Private Debt Deal Tracker.

The Tracker reported 138 deals completed in the third quarter of 2023, up 24.3 percent on Q2 – albeit 23.3 percent lower than Q3 2022. “As central banks near the end of this rate-hiking cycle, a greater level of certainty is possibly returning to the private debt markets after months of volatility,” said Deloitte.

According to Deloitte’s figures, the recovery is being driven by France and Germany – with the UK acting as a drag. Deal volumes in Germany surged by almost 79 percent in Q3 versus Q2, while France has seen volumes match those of last year throughout 2023 and is now comfortably Europe’s most prolific deal market, accounting for more than 31 percent of total deals.

The UK market remains subdued. Having traditionally been the largest European private debt market, its share of deals slumped to just over 20 percent in Q3 – the lowest share for the country on record.

Faes’ new fund for ‘fix-and-flip’ entrepreneurs

Faes & Co, an investment company led by Christian Faes, has launched the Income Fund, a private credit fund focused on the US real estate bridging finance market, with a target raise of $100 million.

Investors will be a mix of high-net-worth individuals and institutions – the institutional money will come chiefly from family offices, according to a person familiar with the matter.

The sector involves loans to corporate entities that act in the ‘fix & flip’ space.

Faes has experience in the real estate bridging finance sector in Australia, the UK and Ireland. He has managed investment funds in the sector for 14 years.

Faes & Co’s statement announcing the launch of the Income Fund, an open-end vehicle available to accredited investors, quoted Christian Faes as saying: “The US real estate bridging finance market has undergone a recent period of disruption, where traditional institutional funders have significantly slowed their appetite for a variety of reasons – from the securitisation market being ‘less open’, to regional banks that have had a flight of deposits post the SVB crisis.”

In the US alone, the short-term mortgage market may be as large as $68 billion a year in originations, the statement said.

The withdrawal of traditional funders  has made the asset class more attractive for alternative lenders, as it’s what Faes called a “large and liquid market for building a diversified pool of asset-backed loans that provide a superior risk-adjusted return for investors”.

The return being offered is between 8.5-10 percent per annum, said a source. The Income Fund is looking toward a very conservative profile of borrower and loan.

The fund will make use of the firm’s understanding of the short-term mortgage market to invest in loans originated by Faes & Co’s own group company, F2 Finance, launched earlier this year.

Essentials

AllianceBernstein expands into NAV lending

AllianceBernstein has launched a new strategic growth initiative, AB NAV Lending, with an initial anchor investment of $500 million from US insurer Equitable Holdings.

AB NAV Lending will offer financing based on the net asset value of private equity funds. This will allow AllianceBernstein’s existing private credit platform, AB Private Credit Investors, to offer fund-level financing to private equity sponsors in addition to portfolio company financing and equity co-investments.

“Equitable is making an anchor investment of $500 million, and AB plans to raise additional capital to invest alongside and in addition to Equitable in order to scale the platform,” said AB head of private alternatives, Matthew Bass.

In a related move, the firm has hired two new executives with fund financing experience: Dupe Adeyemo and Sara Casey.

Adeyemo was most recently with Barclays, where he has worked on fund financing since 2007 and led sourcing and structuring of NAV loans. He is the new AB-PCI managing director and head of NAV Lending.

Casey arrives from Hark Capital, where she has been responsible for sourcing, execution, fundraising and investor relations in the NAV lending space for five years. She is now director of NAV Lending at AB-PCI.

AB-PCI manages $17 billion in assets and has a team of 75 professionals, and will provide the core capabilities, resources and infrastructure to AB NAV. AB-PCI managing director Patrick Fear will chair the new initiative.

New real estate debt head for LBP AM

LBP AM – 75 percent owned by La Banque Postale and 25 percent by Aegon Asset Management – has hired Christophe Murciani to lead its real estate debt team with a brief to expand the offering.

At the end of September 2023, LBP AM had €1.5 billion in assets under management in real estate debt held in three closed-end multi-investor funds and two dedicated funds. Over the past decade, €2.6 billion in financing has been invested in 75 deals.

Murciani will lead a team consisting of six asset class specialists, including three investment managers. One of his tasks will be to expand the product offering in terms of risk profile. He will report to Vincent Cornet, chief investment officer, and joins two investment managers, Alexandre Nedjar and Bruno Rodrigues Saco.

Since 2017, Murciani has worked at Sienna Private Credit (ex-ACOFI Gestion) as head of real estate debt funds and a member of the management committee. He has also worked at Societe Generale, CDC Marchés, Citigroup, Tishman Speyer, Cityhold and JLL.

Trio of appointments at Silbury

Silbury Finance, the Oaktree Capital Management-backed residential development lender, has appointed Matt Taylor as chief financial and operating officer and Andrew Fairley as head of credit.

Taylor will be responsible for scaling Silbury’s finance and compliance functions to deliver rapid business growth, while optimising returns to the firm’s stakeholders through funding structures. He was previously CFO of two Oaktree-backed, vertically integrated development and operational businesses, where he was responsible for the delivery of more than 17,000 residential beds across the UK and Europe and raising more than £800 million (£1 billion; €930 million) of development and investment finance.

Fairley will lead the firm’s credit underwriting and portfolio management function. He has more than 25 years of corporate banking and credit risk experience, primarily in the residential development space, and previously held senior roles at Paragon Development Finance, Housing Growth Partnership and Lloyds Banking Group.

In addition, Jamie Rahder has been promoted to head of origination and will lead the origination and execution of Silbury’s lending strategy in the living sector.

Since launching in January 2021, Silbury has funded projects with a value in excess of £1 billion. It is a specialist provider of investment finance for retirement living, build to sell, build to rent and PBSA schemes across England.

LP watch

Institution: Virginia Retirement System
Headquarters: Richmond, US
AUM: $103.9 billion
Allocation to private debt: 14.3%

Virginia Retirement System announced new private debt commitments and outlined its private debt pacing strategy for 2024 in its November board meeting.

The public pension discussed commitments including $150 million to Orchard Global EleganTree III and $230 million to Park Square Capital Partners V.

Highlights of the private debt pacing plan:

VRS will remain focused on areas of higher growth within the credit programme, which will include direct lending, mezzanine debt, asset-backed, distressed and diversified private credit. It is expected that these strategies will deliver high contractual returns while having structural downside protection.

The pension fund is looking to invest into more co-investments.

The system is committed to taking advantage of developing market opportunities including investments in US distressed, European distressed and asset-backed opportunities.

VRS reported funding attractive investments with double-digit yields over the course of FY23 and as a result, its portfolio has shifted from approximately 20 percent liquid and 80 percent illiquid to 10 percent liquid to 90 percent illiquid.

In terms of mandates, the system hired or upsized eight, representing $1.9 billion in commitments this year.


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