Medley boosts AUM in competitive environment

The asset manager plans to raise capital for a new fund in Q2.

Medley Management has increased assets under management across its multiple credit platforms last year, despite the signs that there is “clearly more competition” in the mid-market credit market, executives said on its latest earnings call on Thursday.

Brook Taube, co-chief executive officer and co-chairman at the firm, said on the call that some corporate credit lenders are becoming more aggressive in the mid-market today, but Medley plans to maintain its cautious direct lending strategy.

“We’re not trying to move billions into the mid-market,” Taube said. The firm is confident with its current originations of $10 million to $30 million loans with a focus on floating rate senior debt, convents and diversification, he added.

Medley also has launched the Sierra Total Return Fund, a non-diversified closed-end interval fund, an investment management company that periodically offers to buy back shares from shareholders, Taube added on the call. The firm expects to start raising capital for the fund in the second quarter this year.

The firm grew its overall AUM to $5.3 billion at 31 December from $4.8 billion at the end of 2015, the earnings results show. This 12 percent year-over-year AUM growth “was driven by the growth in our long-dated private funds and separate managed accounts,” according to the firm’s fourth-quarter and full-year 2016 earnings report filed with the Securities and Exchange Commission.

The firm’s long-dated private funds, Medley Opportunity Funds, target senior secured loans to US borrowers. The most recent of these funds, MOF III, had fee earning AUM of $113 million as of 31 December, while the second fund in the series ended the year with $409 million of fee earning AUM, according to the SEC filing. Though the performance of the third fund was not disclosed, the MOF II showed a gross IRR of 11.6 percent.

The firm’s SMAs had a total of $420 million in fee earning AUM at 31 December, with an aggregate gross portfolio IRR of 9.7 percent.

Medley mostly originates senior secured loans to companies that have revenues between $50 million and $1 billion, generally holding the loans until maturity, the filing reads.

The New York-headquartered investment firm also manages two BDCs, Medley Capital Corporation and Sierra Income Corporation. The MCC has grown to $1.3 billion in AUM as of year-end, representing a 36 percent compounded annual growth rate of AUM from its inception in January 2011. The BDC had an annual net return of 6.7 percent. The SIC ended 2016 with a fee earning AUM of $1.2 billion and an annualized return rate of 6.6 percent.