Monroe holds a first close on opportunistic credit fund

Second vintage has a flexible mandate and is targeting returns of 15-17%.

Monroe Capital has held a first close on its Opportunistic Private Credit Fund II, Private Debt Investor has learned.

The fund has a flexible mandate, and is targeting net internal returns of 15-17 percent and a Total Value to Paid-In Capital multiple of 1.5x to 1.6x, according to documents seen by PDI. Fund II plans to make loans directly to specialty finance companies or against portfolios of asset-backed financing instruments and receivables; bespoke real estate loans geared to multiple asset types across industrial, multi-family residential and other assets; and loans to companies with asset value and premium sum-of-the-parts break-up value that may be suffering from liquidity challenges or unpredictable cash flows, according to a presentation by Monroe Capital that PDI has seen.

Fund II was launched in January 2023 and has a target size of $750 million, per PDI research. That target is considerably larger than that of its predecessor, Monroe Opportunistic Credit Fund I, which closed in May 2022 on $286 million. Fund I has achieved an IRR of 11.81 percent and a TVPI multiple of 1.19x, as of 31 March 2023, per PDI research from the Houston Police Officers’ Pension System, which invested $25 million in it.

Ventura County Employees’ Retirement Association has committed $25 million to Opportunistic Private Credit Fund II, according to its chief investment officer, Daniel Gallagher. In an April memo to VCERA’s board recommending the investment, Gallagher cited the board’s approval in 2022 of increasing its target private credit allocation to 8 percent from 6 percent, and the Monroe investment is part of its plan calling for $225 million to be committed to private credit strategies in 2023. VCERA is also invested in Monroe Private Credit Funds III and IV, which focus on middle market lending.

According to the VCERA memo, fees for Monroe’s Opportunistic Private Credit Fund II are 1.5 percent on invested capital, with an 18 percent carried interest and an 8 percent hurdle rate. Management fees for first close investors are reduced to 1 percent on invested capital and to 12.5 percent on carried interest.

Monroe Capital is a Chicago-based asset manager specialising in private credit markets. It had $17.6 billion under management as of 1 October.