Muzinich & Co has launched a private debt vehicle aimed at retail investors that uses the European long-term investment fund structure.
The Muzinich Firstlight Middle Market ELTIF will operate as a multi-manager vehicle. As an ELTIF it will be highly regulated with the aim of limiting risks in a similar manner to UCITS funds. The fund has been developed with UniCredit’s wealth management arm Cordusio SIM.
Filomena Cocco, managing director of business development at Muzinich, said the ELTIF structure allows retail investors to access asset classes that were only previously available to institutions.
“UCITS funds have a number of restrictions that make them unsuitable for private debt,” she said. “They need daily liquidity, which means you need to be invested in liquid instruments. They also have a 10 percent cap on syndicated loans.”
Cocco said that although ELTIFs are also regulated and have restrictions, their structure is more conductive to providing private debt investment. However, she added that Muzinich’s latest fund had to be designed differently to the kinds of offerings made to institutional investors.
The fund will offer a dynamic portfolio of liquid credit, in the form of European syndicated loans and high-yield bonds, alongside illiquid private debt. The split between the two will depend on the amount raised and the opportunities available. However, Cocco said the fund mix will shift towards private debt later in the fund’s lifespan. The fund will operate for six years with liquidity windows.
The vehicle is intended as an income-generating investment. It will pay a coupon twice yearly and preserve capital with protection against rising interest rates and volatility. The fund will be available to investors in the UK, Ireland and continental Europe.
Manuela D’Onofrio, head of investment products at Cordusio, said: “In the current context, which envisages moderate rates growth and inflation that is unlikely to reach 2%, it is necessary to create instruments that can generate returns even for those clients less inclined to riskier investment classes. With Firstlight we are now able to offer a service aimed at concretely supporting the real economy of European companies.”