Loan Note: We discover LPs’ key concerns; AllianzGI hits milestone with secondaries fund

Our Perspectives report examines investor attitudes in 2023. Plus: a second strategic tie-up for Hildene Capital in quick succession; and Angelo Gordon launches a new business development company. Here's today's brief for our valued subscribers only. 

They said it

“The reopening of China has to be the major event and it will be a key driver for growth”

Laura Cha, head of Hong Kong Exchanges and Clearing, addressing the World Economic Forum in Davos 

First look

On the minds of LPs
Overallocation, rising interest rates and ESG are some of the key investor priorities in 2023.

Here’s a sneaky peek at a few of the key findings from our latest Perspectives study into limited partner attitudes. The report accompanies the February 2023 issue of Private Debt Investor.

Too much of a good thing: As we go into 2023, some 18 percent of limited partners currently describe themselves as overallocated to private debt. That is the highest proportion we have seen since our survey began in 2018, double the previous high of 9 percent in 2021 and up significantly on the 3 percent that were overallocated a year ago. Likewise, fewer LPs than ever before describe themselves as underallocated – with just 34 percent feeling light on the asset class versus more than half a year ago.

Rates/recession top of mind: Going into 2023, private markets investors are anxious about the uncertain macroeconomic outlook and unstable geopolitical climate. When asked about the three factors that will likely have the greatest impact on their private markets portfolios this year, LPs point resoundingly to rising interest rates, the threat of higher inflation and worries about recession in core markets. Last year’s top concern – extreme market valuations – now ranks in fourth place among the issues on LP minds.

Room for improvement on ESG: LPs continue to see room for improvement in the efforts by managers in relation to ESG. Of particular focus is diversity, equity and inclusion, where only 44 percent of LPs rate their GPs’ efforts as either good or excellent in relation to portfolio companies, and just 47 percent consider DE&I to be good or excellent at GP level. Six in 10 LPs think their GPs are doing well at implementing their planned strategies, while the same number are satisfied that the frequency and quality of reporting coming from GPs is either good or excellent.

Debt secondaries close for AllianzGI
Allianz Global Investors has held a €250 million first close on its Allianz Private Debt Secondaries Fund four months after launch.

The fund, which has a target size of €500 million, is the first private markets secondaries fund to be raised by Allianz Group. The fund will focus on senior direct lending opportunities “selectively complemented” by opportunistic positions with the aim of building a diversified portfolio across managers, sectors and geographies.

“The secondaries market in private debt is developing strongly,” said Joaquin Ardit, senior portfolio manager at AllianzGI. “Due to the volatile market environment and a generally maturing market, we expect accelerated growth of private debt secondaries in the next years.”

Essentials

Another strategic tie for Hildene Capital
Hildene Capital Management, a credit-focused asset manager, has entered into a strategic alliance with SILAC Insurance, Utah’s oldest life insurance company. The agreement includes a $2.5 billion quota share agreement with Hildene’s reinsurance affiliate, Ludlow Re.

The alliance comes only weeks after Hildene’s announcement of a close relationship with CrossCountry Mortgage giving Hildene exclusive access to certain non-qualified mortgage originations from CCM’s platform.

In the latest alliance, Hildene takes a significant minority ownership interest in SILAC. Ludlow provides reinsurance for SILAC’s annuities through the quota share agreement, while Hildene offers investment management oversight to $2 billion of SILAC’s general account assets.

Founder and co-chief investment officer of Hildene, Brett Jefferson, said in a statement: “SILAC has built a market-leading annuity distribution platform, and we are excited to partner with Steve [Hilbert, SILAC chief executive officer] and his team at an important point in the company’s evolution.”

The relevant regulators approved the alliance and the deal closed late last month. Evercore provided financial services to Hildene, while Kramer Levin Naftalis & Frankel acted as legal adviser. On the SILAC side, the financial advisory services came from Goldman Sachs, and the legal advice from Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo PC.

SILAC conducts its operations chiefly out of Salt Lake City, Utah. It also has executive offices in Carmel, Indiana, and a satellite office in Kansas. It has offered fixed-indexed annuity products since 2018.

Hildene is headquartered in Stamford, Connecticut. It was founded in 2008 and at present manages more than $12 billion across private funds, tailored managed accounts and securitised asset structures.

Silver Creek hires Hans from UC Investments
Silver Creek Capital Management, a Seattle-based alternative investment manager, has hired Jessica Hans as a managing director. She will be on the firm’s investment committee and its real assets investment committee.

Silver Creek, which was launched in 1999, is expanding its private credit and real assets portfolios.

Most recently, Hans was investment director at UC Investments, working on the endowment and retirement plans of the University of California. There she managed $168 billion of assets as of 30 September 2022. She has also held positions at Blackstone Group, Credit Suisse Securities and Bain.

Eric Dillon, chief executive officer of Silver Creek, said in a statement: “Jessica’s significant expertise in alternative investment sourcing, due diligence and portfolio construction, coupled with her strong network of institutional relationships globally, will be invaluable to Silver Creek as we continue to expand our private credit and real assets capabilities.”

Silver Creek also recently promoted Amy Wells to chief client officer. Wells has been with Silver Creek since 2006 as managing director. Before coming on board that year, she held positions at Washington Mutual and Deloitte & Touche.

Angelo Gordon launches $800m BDC 
Angelo Gordon has launched a new non-traded business development company with more than $800 million in total assets.

Twin Brook Capital Income Fund (TCAP) is the new BDC. Effective 1 January, TCAP had completed a merger with AGTB Private BDC, with TCAP the surviving company. In connection with the merger, TCAP issued close to 21 million Class I common shares to the investors of AGTB. Hereafter, it intends to sell shares in its continuous offering on a monthly basis.

AGTB was an affiliated, privately owned BDC.

TCAP focuses on lending to US private equity-sponsored companies in the mid-market, especially the lower mid-market, understood as companies with less than $25 million of EBITDA.

In a statement, Trevor Clark, head of Twin Brook Capital Partners and chief executive officer of TCAP, said: “We’ve observed growing interest in private credit as an attractive alternative to traditional fixed income in recent years. However, as the private debt space has evolved and attracted more capital, we’ve seen investors become increasingly discerning and more selective when it comes to the types of strategies they are looking at.”

Angelo Gordon has had a mid-market direct lending business, Twin Brook Capital Partners, since 2014. Clark was appointed after spells at GE Capital, Antares Capital and Madison Capital Funding.

TCAP’s portfolio consists largely of floating-rate, senior secured loans across a number of geographies and industries. Its loans are chiefly at the top of the capital structure, with strong lender protection.

Accession backs Slovenian mezz deal
Central Europe-focused mezzanine investor Accession Capital Partners has provided debt and equity to back a carve-out within the Slovenian textiles industry.

The deal will see the firm’s AMC Capital IV fund take a minority stake in Fomtech, which was spun out from its parent company Fori Group by the Forstner family.

Fomtech produces branded technical textile products for sectors such as infrastructure and automotive, with manufacturing sites in Slovenia, Serbia and China.

Martin Forstner, board member at Fomtech, said: “We welcome the financial and strategic backing of ACP, whose experience will be helpful as we continue to develop our business. Their long-term and multi-purpose facility helps free up a core part of our group and will allow Fomtech to reach its full potential.”

LP watch

Institution: Teachers’ Retirement System of Louisiana
Headquarters: Baton Rouge, US
AUM: $23.3 billion

Teachers’ Retirement System of Louisiana has committed $125 million to BC Partners’ latest distressed debt fund, a contact at the pension confirmed.

At the pension’s January board meeting, TRSL announced it will invest $125 million in BC Partners Credit Special Opportunities Fund III. The fund, which is targeting companies in Europe and North America, is seeking distressed debt returns. Its predecessor closed in December 2021 on $1.2 billion, exceeding its $750 million target.

The Baton Rouge-based pension’s recent private debt commitments have tended to focus on Europe or North America-based vehicles targeting a variety of returns.


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